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SBI cuts select rates

Mumbai, June 7: Making its second round of rate cuts since April, the State Bank of India today trimmed deposit rates for select maturities by 25 basis points.

The reduction in interest rates on retail term deposits is being seen as a precursor to a cut in lending rates over the next few days.

It is now largely expected that the RBI will reduce the repo rate again in its mid-quarter review of monetary policy on June 18 to reignite the faltering economy, which grew at its slowest quarterly pace in nine years in 2011-12. When that happens, banks are likely to cut lending rates.

Repo, the rate at which the RBI offers funds to banks, now stands at 8 per cent.

The SBI lowered the retail term deposit rates by 0.25 percentage point in tenors up to 240 days with effect from June 8. While deposits (below Rs 15 lakh) with a maturity period of 7-90, 91-179 and 180 days have been brought down to 7 per cent, the revised rate is 7.25 per cent for deposits between 181 and 240 days.

Sources said the cut in deposit rates followed an improvement in the liquidity situation. In recent days, bank borrowings from the RBI’s repo window have fallen below Rs 1 lakh crore and has been hovering around Rs 87,000 crore. Analysts said the reduction was an attempt by the SBI to protect its margins.

The SBI had last cut deposit rates by 25-100 basis points after the RBI’s annual monetary policy in April. The bank had then reduced rates on fixed deposits with a maturity of 7-179 days by 75 basis points to 7.25 per cent and for term deposits with a maturity of 181 days to less than 1 year to 7.50 per cent from 8 per cent.

 
 
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