MUMBAI: The country's largest lender State Bank of India (SBI) on Wednesday cut its fixed deposits rates by up to 40 basis points (bps) as systemic liquidity remains in surplus amid sluggish credit growth.
This is the bank’s second cut in deposit rates so far in May, with the last one undertaken on 12 May.
After the Reserve Bank of India lowered its repo rate by 40 bps on 22 May, SBI chairman Rajnish Kumar had said the bank will convene a meeting of its asset liability committee (ALCO) - the panel that deliberates on interest rate changes.
Retail depositors will now earn an interest of 5.1% on their 1-2-year term deposits of below ₹2 crore, down from 5.5% earlier. For deposits of ₹2 crore and more, rates have come down by 10-50 bps between 25 April and 27 May, according to data available on the bank’s website.
As on 31 December, SBI’s deposits stood at ₹31.11 trillion, of which ₹16.57 trillion were in term deposits.
Since March last year, the weighted average term deposit rates for public sector banks have fallen the least - by 39 bps. The steepest dip has been in foreign bank deposit rates, by 147 bps. Private banks have lowered deposit rates by an average 70 bps.
Analysts at brokerage firm Motilal Oswal, in a note on 22 May, said the continued monetary easing would drive reduction in lending yields and banks have been sharply cutting retail and bulk deposit rates over the last few months. "Large banks have reduced term deposit rates by up to 150 bps to offset margin pressure. Overall, we believe that large banks with a strong liability franchise would be able to tackle the margin pressure as compared to their mid-sized peers," the note said.
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