Shares of State Bank of India (SBI) rose 4.58 % on Monday closing the session at Rs 312.80 on the National Stock Exchange (NSE).
Shares of State Bank of India (SBI) rose 4.58 % on Monday closing the session at Rs 312.80 on the National Stock Exchange (NSE). The stock of the country’s biggest lender climbed after the bank informed the stock exchanges it would cut the interest rate on savings accounts, up to an amount of Rs 1crore, to 3.5 % from the current level of 4%. The lender introduced a two-tier saving bank interest rate. On BSE, the stock rose by 4.46 % to close at Rs 312.55. The market cap of SBI increased by Rs 11,556.9 crore from 2.58 lakh crore on Monday, according to Bloomberg data. A total of 4.49 crore SBI shares were traded at the counters on the BSE and NSE.
PSU as well as private banks rallied after SBI announced a cut in the savings interest rate. The Nifty PSU bank Index closed the session 3.62 % higher at 3,584.50 while the Nifty Bank ended 1.18 % higher at 24,880.60. “The country’s largest PSU bank’s interest rate cut decision attracted investors to the banking stocks due to an expectation of more peers to follow the trend. Additionally, moderation in inflation to below RBIs target of 4% heightened the expectation of rate cut during the next monetary policy,” Vinod Nair, Head of Research, Geojit Financial Services, said.
The primary factors for revision in the rate of interest on saving bank deposits were a decline in the rate of inflation and high real interest rates. The revision in the savings bank rate would enable the bank to maintain the marginal cost based lending rates at existing rates, benefiting a large segment of retail borrowers in SME, agriculture and affordable housing segments.The rate cut by SBI on Monday comes ahead of the Reserve Bank of India (RBI)’s monetary policy next meet on Wednesday when analysts expect India’s central bank to cut key interest rates. “CPI inflation fell to
1.5% in June 2017, its lowest print since the launch of new series. Core inflation also fell to its all–time low of 3.9%. Moreover, inflation is expected to remain low in the coming months. This prompted expectations of a rate cut by the RBI at its August 2017 monetary policy review,” ICICI Securities said in a report.