The nation's largest lender will not lower deposit rates for savings account even as the Reserve Bank of India cut its benchmark interest rate.
State Bank of India has fixed the interest rate at 3 percent for customers with savings account balances of more than Rs 1 lakh. Customers who have balances up to Rs 1 lakh will continue to earn 3.5 percent interest, it said in a media statement.
This comes even as the RBI's Monetary Policy Committee lowered the repo rate—at which the central bank lends to its clients—by 35 basis points to 5.4 percent in its latest policy meet in August.
Had this rate cut been transmitted to savings bank deposits, customers with balances less than Rs 1 lakh would have earned 2.65 percent interest, SBI said in the statement.
In May, SBI started benchmarking its savings bank interest rate to the repo rate. The savings account rate would be set at 275 basis points below the prevailing repo rate, it had said. The move was aimed at quicker transmission of any changes in the benchmark monetary policy rate to depositors and borrowers, and lowering the savings account deposit rate would also bring down the bank's costs.
Still, RBI Governor Shaktikanta Das earlier this week said while banks have started linking their lending rates to external benchmarks like the repo rate, they “need to move faster”.
Bulk Deposits
Owing to falling interest rates and surplus liquidity, SBI will lower its term deposit rates by 10-50 basis points across tenors. Also, it has cut rates for bulk deposits—those with balances more than Rs 2 crore—by 30-70 basis points across tenors, the statement said. The rates are effective Aug. 26.
(Corrects an earlier version that misstated the rates for savings account balances.)
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