Within a month of raising its retail deposit rates, State Bank of India (SBI) has largely rolled those back. It has cut those rates by 25-100 basis points, following the changed policy stance of the Reserve Bank of India, which led to a reversal of the earlier rising interest rate regime.
The new rates take effect tomorrow. SBI had raised retail deposit rates on March 28 by 25-100 bps. After the revision, the peak rate would be nine per cent, for deposits less than Rs 15 lakh, maturing between a year and less than three years.
Earlier, SBI was paying 9.25 per cent for similar maturities. The reduction in deposit rates were sharp for the short-term buckets, as the bank will now pay 7.25 per cent for less than Rs 15 lakh for seven days to 179 days, from the earlier eight per cent. For more than Rs 15 lakh and less than Rs 1 crore, the peak rate will be nine per cent for deposits maturing between three and 10 years.
According to an SBI official, the effect of the 50 bps repo rate cut by RBI will not have a significant impact on the bank’s cost of funds but SBI had been benefited from the earlier cut of 125 bps in cash reserve ratio (CRR) by RBI.
| REVISION REGISTER |
| Banks that have revised base rate |
| Bank |
Base rate (%) |
Down (bps) |
From |
| ICICI Bank |
9.75 |
25 |
Apr 23,’12 |
| PNB |
10.50 |
25 |
May 1,’12 |
| IDBI Bank |
10.50 |
25 |
Apr 20,’12 |
| Bank of Maharashtra |
10.50 |
10 |
May 1,’12 |
| Allahabad Bank |
10.50 |
25 |
May 1,’12 |
| United Bank of India |
10.45 |
15 |
Apr 23,’12 |
| Kotak Mahindra Bank |
9.75 |
25 |
Apr 26,’12 |
| Deutsche Bank |
10.00 |
50 |
Apr 24,’12 |
| Vijaya Bank |
10.65 |
20 |
May 1,’12 |
| Corporation Bank |
10.65 |
15 |
May 1,’12 |
| Banks that have revised deposit rate |
| State Bank of India |
25-100 |
Apr 24,’12 |
| ICICI Bank |
25 |
Apr 23,’12 |
| Punjab National Bank |
25-50 |
May 1,’12 |
| IDBI Bank |
Oct-50 |
Apr 20,’12 |
| United Bank of India |
Oct-35 |
Apr 23,’12 |
| Lakshmi Vilas Bank |
25-50 |
Apr 20,’12 |
| Corporation Bank |
25-100 |
Apr 25,’12 |
NOTE: State Bank of India is yet to reduce the base rate, which is at 10%
Source: Banks |
“The repo rate cut will translate into a gain of Rs 75 crore, given we borrow Rs 50,000 crore from the liquidity adjustment facility of RBI. On the other hand, the cut in CRR releases about Rs 12,000 crore for us. We can deploy it in government securities and the earning could be above Rs 1,000 crore,” he said, adding this would set the ground for a lending rate cut. He also said about 20 per cent of deposits would get re-priced over the next few quarters following Monday’s rate cut.
Sources in SBI indicate that until the cost of funds come down, it will be difficult for them to reduce the base rate. It might take more than a month for the cost of funds to come down, as deposit rates were raised only in March. SBI, however, is expected to offer lower rates by reducing its spread for some sectors, such as small and medium enterprises and automobile loans.
Regarding home loans, the SBI official said the present festival discount of 25 bps on card rates would get ‘formalised’ in the structure. The bank is yet to take a call on the base rate, despite its peers having reduced their benchmark rate to which all loans are linked. Last week, large lenders like ICICI Bank, Punjab National Bank and Bank of Baroda had reduced their base rate by 25 bps.
On Monday, some more banks revised their base rate. Allahabad Bank reduced its base rate by 25 bps to 10.5 per cent and United Bank of India reduced it by 15 bps to 10.45 per cent. Private sector lender Kotak Mahindra Bank reduced it by 25 bps to 9.75 per cent and among foreign lenders, Deutsche Bank cut the base rate by 50 bps to 10 per cent.
Vijaya Bank has reduced its base rate by 20 bps from 10.65 per cent to 10.45 per cent. It has also reduced benchmark prime lending rate by 25 bps from 15 per cent to 14.75 per cent. The revised rates will come into effect from May 1.
Corporation Bank has reduced base rate by 15 bps for lending from 10.65 per cent per annum to 10.50 per cent per annum, to come into effect from May 1. It has also reduced rate of interest on term deposits by 25 to 100 bps across different maturities with effect from April 25.
