Mumbai: State Bank of India on Monday slashed interest rates on savings account deposit by 0.50 per cent to 3.5 per cent for deposit upto Rs 1 crore with immediate effect while customers with savings bank account balance of Rs 1 crore and above will continue to earn interest at 4 per cent per annum.
According to a senior SBI official, about 90 per cent of the savings account holders falls under the less than Rs 1 crore bracket. The bank decided to revise the interest rate due to cut in marginal cost based lending rates (MCLR) by 90 basis points to 8 per cent effective from January 1, 2017.
The reduction was on the back of large inflows in savings and current accounts during the demonetisation period in the months of November and December 2016.
“The revision in savings bank rate would enable us to maintain the MCLR at the existing rates, benefiting a large segment of retail borrowers in SME, agriculture & affordable housing segments. We encourage people to move to FDR as we expect less volatility and better facilitation due to our strong reach, distribution and franchise network. Reduction in rates was also important as it was difficult to maintain MCLR at the current levels,” said Rajnish Kumar, managing director, national banking group, SBI.
While the bank slashed MCLR by 90 basis points at one go in view of the large inflows into savings and current account post demonetisation, Mr Kumar said that about 60 per cent of those inflows have gone out of the bank.
“This was putting upward pressure on our MCLR. The only option before us was to either cut interest rates on savings account or raise MCLR,” he said and added that while the interest rate on savings bank account has remained static at 4 per cent since 2011, the macro conditions has gone through major changes during the period. In 2012, the CPI inflation was at 9.8 per cent, which has now come down to 1.54 per cent.
