Less than a week after the Reserve Bank of India (RBI) lowered policy rates, the State Bank of India (SBI) on Wednesday cut lending and deposit rates citing adequate liquidity situation.
The country’s largest bank reduced the marginal cost of funds based lending rate (MCLR) by 10 basis points (bps) across tenures. The one-year MCLR, therefore, stands reduced to 8.05%. The new rate may not be applicable to existing home loan borrowers immediately unless these loans are set for a one-year reset clause.
SBI also cut interest rates on its saving accounts for balance below ₹1 lakh to a historic low of 3.25%. The new interest rates on savings deposits will be effective from 1 November. The bank also reduced interest rates on retail term deposits and bulk term deposits by 10bps and 30bps, respectively, for 1 year to less than 2 years’ tenor. The new fixed deposit rates will be effective from 10 October 2019.
Two years ago, SBI was the first bank to cut savings deposit rate by 50bps to 3.5%. Soon others followed suit. Most banks currently offer 3.5% interest on savings deposits up to ₹50 lakh. Small and mid-sized private sector banks such as IDFC First Bank offer a 6% rate on savings accounts with balance less than ₹1 lakh. RBL Bank offers a 5% rate.
In May this year, SBI had introduced repo linked savings account for balance above ₹1 lakh, while interest for balance up to ₹1 lakh was retained at 3.5%. At the current repo rate of 5.15%,…