SBI raises fixed deposit rates by 0.25%

New rates effective from Mar 1, applicable for 4 categories with maturities of over one year; cuts premium on senior citizen deposits

At a time when the central bank is indicating softer interest rate bias, State Bank of India – the country’s largest lender – has increased deposit rates by 25 bps for all tenures above 1 year. The lender, however, has reduced the premium it pays on deposits of senior citizen to 25 bps. SBI’s senior citizen depositors were earlier earning 50 bps more than the card rate. ICICI Bank – the largest private sector bank of the country ICICI Bank pays 50 bps more to senior citizen for deposits upto 2 years and offers 75 bps more for deposits of over 2 year tenure.

SBI’s new rates will come into effect from March 1. The Reserve Bank of India, in its first quarter review of monetary policy in January had reduced the key policy rate by 25 bps point. The rate cut by the central bank was aimed at boosting growth which has been slowing down.

SBI has been seeing competition on the deposit front from tax savings instruments and other banks, as the bank’s deposit rate for lowest among the others. SBI will now pay 8.75% for all deposits of over one year maturity.

The finance ministry was prodding public sector lenders to cut the premium on senior citizen deposit for some time now, so that it can reduce overall cost, which in turn will help them to cut lending rates.  While public sector banks are under pressure to cut the premium on deposits that senior citizens enjoy, most private banks continue to pay more to older depositors.