SBI cuts interest rate on savings account deposits

The change only applies to deposits below Rs 1 crore.

The State Bank of India has cut down interest rates on savings account deposits to 3.5 per cent from the current 4 per cent. Customers with less than Rs 1 crore deposits in savings account will lose out 0.5 per cent interest.

SBI announced the introduction of the two-tier saving bank interest rate on Monday and stated that 4 per cent interest will continue or savings account with a balance above Rs 1 crore. SBI is expected to save around Rs 3,700 crore on Savings Bank Interest Rate keeping in mind the March numbers.

The interest rate revision is expected to enable SBI to maintain key lending rate at the existing rates. Analysts believe that interest rate cut will benefit a large segment of retail borrowers in SME, agriculture and affordable housing segments.

"The decline in the rate of inflation and high real interest rates are the primary considerations warranting a revision in the rate of interest on savings bank deposits," said a statement from SBI. SBI has also cut its key lending rate, by 90 basis points effective January 1, 2017. This on the strength of large inflows in savings and current accounts after demonetisation. "There has been signification outflow of Current Account and Savings Account(CASA) deposits or low-cost deposits since then," the statement added.

As on March 31, 2017, SBI savings accounts had total deposits of 7.43 lakh crore which formed 36.4 per cent of all SBI deposits. While the interest rate cut may not come as great news to account holders with a balance less than Rs 1 crore, Markets responded in the positive.

Nifty Bank trading hit a record high after SBI's announcement. Nifty PSU Bank Index surged over 2.9 per cent with Bank of Baroda, SBI and Punjab National Bank becoming top gainers

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