Mumbai, Sept. 5: The State Bank of India (SBI) today slashed its interest rates on term deposits by 50 to 100 basis points, more than a month after it cut lending rates on car and home loans.
The country’s largest lender cut its deposit rates by half a percentage point for most of the maturity buckets. But in the case of deposits between 241 days and one year, it cut the rate by 1 percentage point to 6.5 per cent.
The rate changes will come into effect from September 7.
Banking circles saw the deposit rate cut as an attempt by the SBI to protect its margins. It comes at a time the banking system is awash with cash after the RBI reduced the statutory liquidity ratio for banks by a percentage point to 23 per cent, effectively pumping Rs 60,000 crore into the system.
Last month, the SBI had cut its interest rate on home loans by 60 basis points and on car loans by 50 basis points.
Since then, several state-run banks have also cut their lending rates on car and home loans for new borrowers to boost their retail lending portfolio ahead of the festival season. Many reckon that these lenders will now follow the SBI’s lead and lower their deposit rates as well.
Following the revision, the interest rate on fixed deposits between 7 and 90 days will come down to 6.50 per cent from 7 per cent. Similarly, the interest rate on term deposit between 91 and 179 days and that for 180 days would come down by the same margin to 6.50 per cent.
On the other hand, fixed deposit with a maturity of 181 to 240 days will now carry an interest rate of 6.50 per cent against 7.25 per cent earlier.
The interest rate on fixed deposits with a maturity of between 1 year and less than 2 years will come down to 8.5 per cent from 9 per cent.
The interest rate for deposits with a maturity period between 2 and 3 years, and 3 and 5 years has been slashed to 8.5 per cent as well.
The lender has left interest rate unchanged at 8.5 per cent for term deposit of 5 to 10 years.
The SBI had reported a net interest margin (NIM) of 3.57 per cent in the first quarter ended June 30, marginally lower than 3.62 per cent in the year-ago period. NIM is the difference between interest charged on assets and what it pays depositors. SBI chairman Pratip Chaudhuri has said the bank would maintain NIMs at around 3.75 per cent in the current fiscal.