SBI offers big relief to customers as it cuts rates; term on minimum deposit goes


State Bank of India (SBI) on Wednesday cut loan and deposit rates while doing away with the average monthly balances and SMS charges. While lending rates were lowered by 10-15 basis points, term deposit rates were cut by a sharper 10-50 basis points.

The marginal cost of funds-based lending rate (MCLR) was pruned by 10-15 basis points (bps) across tenors with effect from March 10, with the one-year MCLR falling by 10 bps to 7.75%. Cumulatively, SBI has cut the one-year MCLR by 65 bps so far in 2019-20. The interest rate on savings bank accounts too was revised to a flat 3% per annum.

The term deposit in the “1 year to less than 2 year” tenor stood at 5.9%, down from 6%. “Ultimately, deposit rates are a question of demand and supply in the market, whether or not you need deposits. The market has a liquidity surplus of Rs 2.5-3 lakh crore. As long as the deposit rates don’t go and hit the repo rate, they have a potential to fall if the liquidity continues to be high. At SBI, the bulk deposit rate is now practically equal to what you get in repo,” a senior official at SBI told FE.

In a major announcement that could bring relief to its savings account customers, the country’s largest lender waived off the average monthly balance (AMB) requirement on all of its 44.51 crore savings deposits. So far, the savings bank customers needed to maintain an AMB of Rs 3,000, Rs 2,000 and Rs 1,000 in metro, semi-urban and rural areas, respectively. Else, the bank used to levy a penalty of Rs 5 to Rs 15 plus taxes on non-maintenance of AMB. The bank also waived off SMS charges.

The bulk term deposit rate (Rs 2 crore and above) was reduced by 15 bps for deposits in “180 days & above” tenors, with the one-year bulk term deposit having an interest rate of 4.6%. Retail term deposit interest rates were cut by 50 bps for deposits with tenors of up to 45 days.

Although lending rates have been coming down, loan growth is not picking up and is hovering around near-two year lows. Consequently, banks continue to trim the interest rates on deposits. The RBI has conducted auctions via long term repo operations (LTRO) totalling Rs 75,068 crore, which has also added to the liquidity in the system. The surplus liquidity in the system stood at nearly Rs 3 lakh crore throughout the week ended March 6, said Care Ratings in a report.

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