The State bank of India (SBI) has cut the interest rate on savings bank accounts by 50 basis points (bps) – bringing it down to 3.5 per cent from 4 per cent. The new rates apply to account-holders having deposits below Rs 1 crore and will be effective immediately.
The revised interest rate for savings accounts having up to Rs 1 crore deposit now stands at 3.5 per cent while those having above Rs 1 crore balance in their savings accounts will continue to enjoy the 4 per cent interest rate.
"The bank is introducing a two-tier saving bank interest rate with effect from July 31, 2017. While balance above Rs 1 crore will continue to earn interest at 4 per cent per annum, interest at 3.5 per cent per annum shall be offered on balances of Rs 1 crore and below," the largest public lender said in a BSE filing.
"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," SBI said.
Following the announcement, the shares of SBI were trading at Rs 311.15, up by Rs 12.05 or 4.03 per cent. The scrip opened at Rs 299 and has touched a high and low of Rs 313.3 and Rs 298.1 respectively.
SBI Managing Director Rajnish Kumar said that 90 per cent of the total savings accounts held by the bank have balance below Rs 1 crore.
He said the cut in interest rates was not likely to affect the number of savings accounts with the bank or its current and savings account (CASA) ratio.
"It is the convenience, safety, trust which is still in the bank's favour. We are not anticipating any major impact on the CASA ratio or saving accounts," he said.
SBI had maintained the 3.5 per cent interest rates for its savings accounts from 2003-11. In 2011, it was increased to 4 per cent for all saving deposit accounts.
Kumar said the rate cut had nothing to do with the impending Reserve Bank of India (RBI) monetary policy on August 2.
Further, the bank had cut the marginal cost based lending rates (MCLR) by 90 bps effective from January 1, on the strength of large inflows in savings and current accounts during the demonetisation period in the month of November and December 2016.
"There has been a significant outflow of CASA deposits since then. The revision in saving bank rate would enable the bank to maintain the MCLR at the existing rates, benefiting a large segment of retail borrowers in Small and Medium enterprise (SME), agriculture and affordable housing segments," it said.
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