//SBI cuts interest rate on savings account deposits

SBI cuts interest rate on savings account deposits

SBI

(State Bank of India) has cut interest rate on savings bank accounts to 3.5 per cent from 4 per cent on balance of Rs 1 crore and below, the country’s largest public sector lender informed the stock exchanges on Monday in a regulatory filing. About 90 per cent of SBI’s savings bank accounts have balances under Rs 1 crore.

“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 in a statement.
The change in the structure is effective immediately and also marks the introduction of a new two-tier savings account interest rate system as balance of over Rs 1 crore will continue to attract the earlier 4 per cent rate. Analysts and markets see the bank’s move as a positive and believe the 0.5 per cent cut in savings bank deposits will aid in boosting SBI’s margins. SBI almost always leads the rate cut cycle with other banks following suit. Analysts expect the same to happen with Monday’s interest rate cut.

Post the announcement, the SBI stock shot up nearly 5 per cent to Rs 312.65, while the broader Nifty traded flat.
SBI also informed the bourses that it had cut the MCLR (marginal cost of funds based lending rate) or its key lending rate, by 90 basis points effective January 1, 2017, on the strength of large inflows in savings and current accounts after demonetisation. “There has been significant outflow of CASA (current account and savings account) deposits. The revision in savings bank rate would enable the bank to maintain MCLR at the existing rates, benefitting a large segment of retail borrowers in SME, agriculture and affordable housing segments,” SBI said.