Savings deposit rates of some PSBs at historic low, says RBI bulletin

Savings deposit rates of some public sector banks (PSBs) are prevailing at a historical low, since their de-regulation in 2011, according to the latest bulletin of the Reserve Bank of India (RBI).

The weighted average domestic term deposit rates for fresh deposits has declined significantly for both PSBs and private sector banks.

"Currently, the savings deposit rates of some PSBs are prevailing at a historical low, since their de-regulation in 2011," said an article published in the the RBI's July bulletin.

In October, 2011, the RBI had deregulated the savings bank deposit interest rate, and allowed banks to determine the interest rate at their own.

The rates on small savings schemes were kept unchanged by the government during the ongoing September quarter.

The prevailing rates on these instruments are higher than the formula-based rates by 33-118 bps, the article said.

It further said in response to the 100-bps reduction in the policy repo rate since February 2025, banks have adjusted their repo-linked external benchmark-based lending rates downward by 100 bps and marginal cost of funds-based lending rate by 10 bps.

Consequently, the weighted average lending rates on fresh and outstanding rupee loans of commercial banks declined 26 bps (domestic banks - 24 bps) and 18 bps (domestic banks - 16 bps), respectively, during February-May 2025.

On the deposit side, the weighted average domestic term deposit rates on fresh and outstanding deposits moderated by 51 bps and 2 bps, respectively, during the same period.

During the current easing cycle (February-May 2025), the decline in weighted average lending rates on both fresh and outstanding rupee loans was higher for PSBs as compared to private sector banks.