SBI savings account balance will fetch lower interest rate from next month1 min read . Updated: 30 Oct 2019, 11:32 AM IST
- SBI had earlier this month had also cut interest rate on fixed deposits or FDs
- Banking have been lowering their interest rates
The interest rate on savings account deposits with SBI or State Bank of India will fetch lower interest rates, effective from November 1. India's biggest bank had announced the rate revision earlier this month. Balances of less than ₹1 lakh in savings deposits with SBI will fetch 3.25%, as compared to 3.5%, from November 1. SBI, the largest commercial bank in terms of assets, deposits, branches, customers and employees, has a deposit base of over ₹30 lakh crore.
Here are 5 things to know about interest rate on SBI savings account:
1) SBI attributed "adequate liquidity in the system" for the interest rate cut. SBI had also cut interest rate on fixed deposits on select maturities with effect from 10th October, 2019. The Reserve Bank of India has lowered its benchmark interest rate by a combined 135 basis points so far this year and has been taking measures to improve liquidity in the banking system to boost credit offtake and faster transmission of rate cuts.
2) SBI will however keep interest rate on savings account with balances above ₹1 lakh unchanged at 3% per annum.
3) SBI was the first bank in India to link savings account rates on large balances to the RBI's repo rate when it rolled out the new mechanism in May 1. The interest on savings accounts with balances above ₹1 lakh was kept 275 basis points below RBI’s repo rate, with a minimum of 3% for the entire balance.
SBI had in May also had also linked borrowing rate on cash credit accounts and overdraft facilities with limits above ₹1 lakh to the RBI's repo rate, plus a spread of 2.25%. SBI charges a risk premium based on the risk profile of the borrower.
4) Consequent to RBI's rate cuts, SBI lowered interest rate on savings account balances above ₹1 lakh to 3%. But it has kept the rate unchanged at 3%.
5) Savings account interest up to ₹10,000 a year is tax free under Section 80 TTA of the Income Tax Act. Senior citizens enjoy a higher limit of ₹50,000.
Never miss a story! Stay connected and informed with Mint. Download our App Now!!