SBI cuts rate for savings deposit below Rs 1 crore

SBI cuts interest rates by 0.5% on savings account deposits

The bank will introduce a two-tier rate structure immediately.

India's largest lender said it would lower deposit rates by 50 basis points on accounts with a balance of 10 million rupees ($155,994.07), although the rate would remain at 4 percent for those with higher amounts. "The lender, however, will continue to pay 4 per cent interest on savings bank accounts with deposits of above Rs 1 crore", SBI said in a statement.

About 90% of SBI's savings accounts have balances under Rs 1 crore.

Following the decrease in inflation at the stock market exchange, State Bank has slashed its interest rates on the savings account by 0.5 percent. Till July 31, all savings bank deposits earned the four percent interest.

The 0.5 per cent cut in savings bank deposits is expected to boost SBI's margins and it showed also as post the announcement, the SBI stock shot up almost 5 per cent to Rs 312.65. Similarly, the stock rose by 4.48 per cent to close at Rs 312.50 on NSE as well, registering the top gainer on both the indices during the day.

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Rajnish Kumar, managing director in charge of national banking at SBI, said the decision had been taken at its usual month-end asset-liability meeting. Rate cut won't result in outflows from savings deposits, he added.

This type of cut would impact SBI favourably, an analyst with a foreign brokerage firm said, as it would bring down the cost of funds for the bank and in turn, help boost net interest margins (NIM) for the bank.

"Investors are always interested in rate cuts and have been expecting a rate cut for quite some time now", said Sunil Sharma, chief investment officer at Sanctum Wealth Management. Earlier, SBI used to give 4 per cent interest to its customers.

As on 31st March, 2017, SBI had 3.27 crore Internet Banking customers and almost 2 crore Mobile Banking customers.

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