Country’s largest lender State Bank of India (SBI) 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.”