Savings rate cut: Decline in govt banks' deposit share may accelerate

High share of PSBs in deposits has weighed on their cost structure, which the rate cut will correct

The interest rate cut on savings deposits by the country’s largest bank, State Bank of India (SBI), would have a positive implication on its margins in the short-term.

Public sector banks’ (PSBs’) liability franchise, which has proved to be more resilient over the years than their lending business, is likely to see a decline, as depositors move their savings to banks and instruments offering higher interest rates.

Other PSBs are also likely to cut rates on savings accounts, which, analysts say, will not be a bad thing for them. “SBI may lose some of the current and savings deposits to