| Purwar: Time to pinch
Mumbai, March 3: State Bank of India (SBI) could slash fixed-deposit rates following the Reserve Bank of India’s (RBI) decision to cut the yield on saving accounts by half a percentage point to 3.5 per cent last Friday.
Senior officials say no final decision has been taken so far, but last week’s rate rejig has made a review of the bank’s deposit-rate structure necessary. No immediate reduction in lending rates is on the cards, Purwar said.
The RBI brought down the interest rate on saving accounts and pruned the repo rate — both by 50 basis points — hours after the budget was presented on Friday. Finance minister Jaswant Singh cut interest rates on public provident fund (PPF) and small savings schemes by one percentage point, with effect from March 1.
Though most commercial banks have yet to announce their decision on deposit rates, there are signs Bank of Baroda (BoB) is already mulling such a move.
In another indication that rates will fall further, the RBI today revised downwards the ceiling on maximum interest rates that non-banking financial companies (NBFCs) can pay on public deposits — from 12.5 per cent to 11 per cent per annum — from Tuesday. It said this was being done after taking into account market conditions and changes in other interest rates.
This is the maximum an NBFC can pay on its deposits; they can offer less. The new ceiling of 11 per cent has also been extended to deposits accepted by miscellaneous non-banking companies (chit-fund entities). The new rates will apply to fresh deposits and renewals.
SBI had cut its prime lending rate (PLR) by 25 basis points to 10.75 percent on October 31, following the monetary and credit policy. In January, it sliced rates on long-term domestic term deposits by 25 basis points.
After the revision, deposits kept with SBI for a year to less than two years fetched 5.75 per cent (6 per cent), those from two years to less than three years earned 6 per cent (6.25 per cent). Funds that remain for three years and more now get a return of 6.25 per cent (6.50 per cent).