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SBI slashes interest rate on saving deposits up to Rs1 crore by 50 bps

LiveMint logoLiveMint 31-07-2017 Gopika Gopakumar

Mumbai: The country’s largest lender State bank of India (SBI) has cut savings deposit rate on balances up to Rs1 crore to 3.5% from the existing rate of 4% per annum. In a notice to the exchanges, the bank said it will introduce a two-tier savings bank rate effective from 31 July.

While the balance above Rs1 crore will continue to earn an interest of 4% per annum, a revised rate of 3.5% will be offered on balances of Rs1 crore and below.

“The decline in the rate of inflation and high real interest rates are the primary considerations warranting a revision in the rate of interest on savings bank deposits,” said the bank in a notice to the exchanges.

The cut in savings rate by SBI is the first such move by any bank since the Reserve Bank of India (RBI) de-regulated the savings rate in 2011.

Theoretically, a cut in savings rate should have an impact on lending rate as the benchmark rate is calculated taking into account interest rate offered on low-cost savings and current account deposits.

However, the bank clarified that it had cut its marginal cost of lending rate (MCLR) by 90 basis points in January 2017 following the large inflows in savings and current accounts post the government announced demonetisation on 8 November.

Since then, the bank has seen a significant outflow of deposits

“The revision in savings bank rate would enable the bank to maintain MCLR at the existing rates, benefitting a large segment of retail borrowers in SME, agriculture and affordable housing segments,” the bank added in its notice.

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