For the first time after the saving bank deposit rates were deregulated by Reserve bank of India (RBI) in October 2011, State Bank of India will be bringing down its savings bank rate to 3.5% for deposits up to Rs 1 lakh effective May 1, 2019. The bank has around 440 million savings bank accounts. About 95% of this customer base have deposits of only up to Rs 1 lakh. For deposits above Rs 1 lakh the new deposit rate will be 3.25%.
The new rates will be effective after the bank links its savings bank deposits to the repo rate from May 1.Two loan products – cash credit and the overdraft facility over Rs 1 lakh - will also become cheaper by 25 bps as these products get linked to the repo rate. This means that when there is a movement in the repo rate, savings bank deposit rates and the select lending products will be impacted.
SBI's cut in its savings bank deposit rates may trigger other big banks to bring down their rates. The saving bank deposit rates were for the first time deregulated in October 2011 but all the big banks continued to keep the rates steady at 4%. YES Bank was the first bank to seize the opportunity and hike its rates to 6% in October 2011 after RBI deregulation.