SBI cuts deposit rates by 0.25 per cent

Mumbai: Country's largest lender, State Bankof India today cut its deposit rates for maturities of over one year by 0.25 per cent, making it the third bank after  private sector rivals, ICICI Bank and HDFC Bank, to reduce  deposit rates this week. The bank, which has already affected rate cuts in the short-term maturities of up to a year in two moves over the  past few months, today reduced the rates for deposits of  over one year.  Under the revised pricing applicable from Monday, a deposit in the bank for over one year but less than five years will fetch an interest of 8.50 per cent as against the earlier  8.75 per cent. 

For deposits of five years and above, the rate has been reduced to 8.25 per cent as against the earlier 8.50 per cent,  the bank said in a filing to the exchanges.  The review is for retail deposits of under Rs 1 crore,  the bank said.  The move comes a day after two private sector banks  announced cuts of up to 0.50 per cent in maturities of up to  one year. 

State-run IDBI Bank had also yesterday announced 0.50 per  cent cut in deposit rates for maturities starting from 6  months to 20 years.  The moves are important as these are generally a precursor to a drop in borrowing rates.  It comes within days of Reserve Bank Governor Raghuram  Rajan going public with his disappointment on banks for not  transmitting the policy actions to the general public through  lending rate cuts. 

The Governor had said there has been a fall in rates in  the money markets due to a variety of reasons, including an  expectation that the RBI will become more accommodative in the  future, but the banks' rates are not reflecting the same. 

SBI chairperson Arundhati Bhattacharya had said, "Banks  get very little resources from the money market. For instance,  SBI does not have a single CD (Certificate of Deposit) in the  market and so to that extent the rates coming down in the  money market won't really impact us. Therefore, there is no  question of transmission."