State Bank of India Lowers Interest Rates: What It Means for You
SBI Reduces Rates on Fixed Deposits and Savings Accounts
State Bank of India Branch (Photo: ANI)
Mumbai: The State Bank of India (SBI) has once again lowered interest rates for depositors. Here’s what you need to know about these changes:
What’s New?
- Starting June 15, SBI has reduced interest rates on retail term deposits by 25 basis points.
- This change affects deposits of up to Rs 3 crore across all tenures.
- The savings account rate is now at 2.5%, which is the lowest it has ever been.
These rate cuts apply to both new and renewing deposits. They reflect a broader trend of decreasing deposit yields. This comes after the Reserve Bank of India (RBI) reduced the repo rate by 50 basis points earlier this month.
Why Did SBI Cut Rates?
SBI wants to protect its profit margins. About 45% of SBI’s Rs 36 lakh crore loan book is linked to the repo rate. This includes:
- Home loans worth Rs 8.3 lakh crore
- Auto loans worth Rs 1.2 lakh crore
The bank’s best home loan rates for new loans are now at 7.5%. The cut in the benchmark rate will lower the bank’s annual interest income by about Rs 8,100 crore.
How Does This Affect Savings?
By reducing savings deposit rates, SBI can limit the impact on its income. With Rs 23 lakh crore in such accounts, the lower payout helps the bank save an estimated Rs 5,750 crore annually.
Other Banks Are Doing the Same
SBI is not the only bank cutting rates. Other banks have also reduced their rates:
- HDFC Bank has lowered its savings account rate on high-value deposits to 2.75%. It has also reduced fixed deposit rates by up to 25 basis points.
- ICICI Bank, Canara Bank, and YES Bank have also cut their fixed deposit rates.
These changes aim to protect the banks’ net interest margins as credit growth slows down. For depositors, this means another reduction in already low returns.
A Look Back at Savings Rates
The deregulation of savings rates had raised hopes for more competition among banks. However, the trend has been different. Here’s a look at SBI’s savings rate over the years:
- 4% in the early 2000s
- 3.5% by 2003
- 2.7% by 2020
