SBI Slashes Deposit Rates On Easier Liquidity

State Bank of India has cut interest rates on fixed deposits in response to easier liquidity conditions and policy rate cuts, the lender said in a statement on Monday.

Interest rates on fixed deposits have been cut by 20-75 basis points across different maturities, the lender said. The revised interest rates are effective from Aug. 1, 2019.

The steepest rate cuts have been seen on shorter tenor deposits.

The interest rate offered on fixed deposits up to 45 days has been cut to 5 percent from 5.75 percent earlier. Retail deposits up to 179 days will earn 50 basis points less, while deposits of between 180 days and 210 days will earn 10 basis points less at 6.25 percent. In the category of deposits between 210 days and 1 year, rates have been cut by 15 basis points.

Retail term deposits are those of value below Rs 2 crore.

In the category of bulk deposits of between Rs 2-10 crore, the sharpest rate cut is in the 7-45 day category, where rates have been cut by 75 basis points. In the 1-2 year, category, there has been no cut in rates.

Rates for bulk deposits above Rs 10 crore remain unchanged.

The interest rate cuts would have an impact of about 5-10 basis points on SBI’s cost of deposits, said PK Gupta, managing director of State Bank of India. This should then transmit into lower lending rates via a cut in the marginal cost lending rate (MCLR), Gupta said, adding that the bank’s asset-liability committee is set to meet in the first week of August.

India’s Monetary Policy Committee has cut the benchmark repo rate by 75 basis points since the start of 2019. Banks, however, have reduced lending rates only marginally as deposit growth has remained below credit growth, preventing lower rates.

Reserve Bank of India Governor Shaktikanta Das, in a recent meeting with bankers, flagged off the “less than desired level of transmission of monetary policy rates”, the central bank said in a statement on July 19. Government officials, too, have said that transmission of policy rate changes needs to pick up.

Though the RBI had suggested external benchmarking of lending rates by banks by linking them to changes in the repo rate back, banks were against this move and the decision has since been deferred.

Gupta said that liquidity conditions have eased in recent weeks and there has been some slowdown in credit demand. This has allowed for deposit rates to come down, which will eventually reflect in lending rates, he added.