SBI reduces interest rate for some deposits

SBI reduces interest rate for some deposits

Mumbai: State Bank of India (SBI) on Thursday reduced interest rates for deposits with a term of more than five years to 8.5%, effective 7 August. The bank currently offers 8.75% for deposits of up to 1 crore and 9% for deposits above 1 crore in this basket.

India’s second largest public sector lender, Punjab National Bank (PNB), meanwhile, increased its deposit rates by 25 basis points (bps) to 9% for a maturity of one year, effective Thursday. One basis point is one-hundredth of a percentage point.

SBI’s selective deposit rate cut comes a day after the country’s largest lender reduced its home and auto loan rates, citing extra liquidity support through the Reserve Bank of India’s decision to pare banks’ mandatory bond holding limit to 23% of total deposits from 24% earlier. The bond holding limit is called the statutory liquidity ratio (SLR).

SBI said the SLR cut gives it additional liquidity of about 10,000 crore and the management had decided to pass this on to customers and expand the balance sheet.

SBI reduced home loan rates from 10.75% to 10.25% for loans up to 30 lakh while loans above that will be offered at 10.40%. Auto loan rates were reduced from 11.25% to 10.75%.

While the reduced rates are for new customers, existing borrowers can switch to them by paying 1% of the outstanding loan amount to the bank as fees. It said this was not an early payment penalty. “Cost is a factor of time," said P. Pradeep Kumar, deputy managing director and group executive for global markets at the bank. “We are offering the new rates now based on the existing cost. Even then, our rates are the most competitive in the industry."