SBI has presented a new two-tier savings account interest rate system from today (July 31, 2017). On balances below Rs. 1 crore, the interest rate has been brought down to 3.5% from 4%. On balances above Rs. 1 crore, the bank will continue to offer 4%. “The decrease 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,” India’s biggest bank said in an announcement.
Further, the bank said that it had cut the MCLR (marginal cost of funds based lending rate) or its key lending rate, by 90 basis points effective January 1, 2017, on the strength of large inflows in savings and current accounts after demonetisation. Also, there has been signification outflow of CASA (current account and savings account) deposits or low-cost deposits since then, it included.
The revision in savings bank rate would enable the bank to keep up MCLR or key lending rate at the current rates, profiting a large segment of retail borrowers in SME, agriculture and affordable housing segments.
SBI shares climbed by 3% after the declaration. Analysts say that the reduction in savings bank deposits will help the lender’s margins. Different banks are additionally expected to follow SBI’s move and could cut the interest cost on savings bank deposits, analysts say.
The Reserve Bank of India (RBI) is relied upon to cut interest rates when it meets on August 2 however an improving economy is probably going to keep it on the sidelines for a long time thereafter, a Reuters poll showed. A significant control in retail inflation over the past three months has reinforced calls for further monetary policy easing from the central bank, which changed its stance to accommodative at the start of the year.