Mumbai: State Bank of India, the country’s largest lender, on 6 August raised interest rates on deposits for longer tenure of more than three years to 8.5%, but lowered or kept unchanged rates on most short-term maturities.
The term deposit of 271 days (nine months) to less than one year will get an interest rate of 6.75%, while the bank reduced rate on 1-2 year deposits to 8% a year, SBI informed the Bombay Stock Exchange.
The new rates would come into effect from 9 August. The bank last revised its rates on 22 January this year.
The rate of 2-3-year maturities has been increased to 8.25%. At the same time, fixed deposits with three-year maturity would now attract 8.5% against 8.25% earlier.
However, senior citizens would earn lesser interest on 1-2 year deposits at 8.5% while that on 2-3 year term deposit has been raised to 8.75%. Earlier, 8.75% interest was paid on deposits of 3-5 years maturities. Deposits of 3-10 years would now get interest at the rate of 9%.
The revision comes barely a week after RBI hiked the amount of depositors’ money commercial banks need to park with the central bank by half a percentage point.
Responding to the measures announced by RBI many public sector lenders including Bank of India and Bank of Baroda reduced interest rates by 0.5% to 9% on their special one-year deposit schemes.
Earlier during the day (6 August), Finance Minister P Chidambaram said he expected banks to lower deposit rates by 0.5%.
“Some banks have already done that and interest rate have come down to 8.5%. My impression is that it will stabilise at that level,” he told PTI.
SBI also reduced the interest offered on its Super Saver Term Deposit Scheme for four years and above but less than five years by 0.25% from 9.5% to 9.25%. The interest rate for tenors of five years and more will be aligned to the card rates of corresponding maturity.
On SBI Smart Deposit Scheme, the bank said the interest rate offered on the 550-day deposit scheme ‘SBI Smart Deposit’ would also be pared by 0.25% from 9.5% to 9.25%, effective 9 August.
Recently, Chennai-based Indian Overseas Bank had cut interest rates across the board on all fixed deposits with maturities up to 10 years. Other banks like Kolkata-based UCO bank and Vijaya Bank are also looking at slashing deposit rates by 50-100 basis points.
Deposits on fixed deposits of tenure 1-3 years could be reduced by 1% within a month, UCO Bank chairman S K Goel had said recently.