SBI cuts medium-term deposit rate by 25 bps

Simultaneously, the bank has hiked the deposit rate by 25 basis points in the 180-210 days category to 7.25%

Flush with funds, the country’s largest commercial bank, State Bank of India, has cut the interest rate on medium-term deposits (one year to less than three years maturity) by 25 basis points (bps) to 8.75 per cent.

It also raised the deposit rate by 25 bps in the 180-210 days category to 7.25 per cent. The new rates will be effective from Thursday.

This is the second time in this quarter that the bank has revised deposit rates. In July, it had reduced the interest rate on fixed deposits up to 179 days by 50 bps and on bulk deposits by 25 bps.

SBI said the latest revision was due to abundant liquidity, coupled with slower than anticipated credit pick-up. A senior executive said deposits have been growing at a healthy rate of 13-14 per cent but credit expansion remained tepid at only seven per cent.

Inflation is trending down at a faster clip. So, this rate adjustment (cut) will continue to ensure savers are compensated adequately with a positive real rate on their deposits, the bank said.

About the effect of SBI action on other banks, R K Dubey, chairman and managing director of Canara Bank, said “We will take a call depending on the situation. Every bank will go to its asset-liability committee and decide.”

Meanwhile, ICICI Bank, the country's largest private sector lender, has increased the interest rate on bulk deposits (above Rs 1 crore) on the maturity period of 30-45 days by 10 basis points. The rates have been increased to 8.35 per cent from 8.25 per cent and the new rates are effective Tuesday.
CHECKS & BALANCES

• SBI cuts the interest rate on medium-term deposits (1 year to less than 3 years maturity) by 25 bps to 8.75%
• It also raises the deposit rate by 25 bps in the 180-210 days category to 7.25 per cent
• This is the second time in this quarter that the country’s largest lender has revised deposit rates
• SBI says the latest revision is due to abundant liquidity, coupled with slower than anticipated credit pick-up