MUMBAI: India’s largest lender, State Bank of India , has cut returns for depositors again. Effective June 15, the bank reduced interest rates on retail term deposits of up to Rs 3 crore by 25 basis points across tenures. Simultaneously, it brought down the savings account rate to 2.5 per cent, its lowest ever. These cuts apply to both new and renewing deposits, reflecting a wider easing in deposit yields after the RBI reduced the repo rate by 50 basis points earlier this month.
The rationale behind the uniform cut is protect the bank’s margins. Around 45 per cent of SBI’s Rs 36 lakh crore loan book is linked to the repo rate. These include home loans (Rs 8.3 lakh crore) and auto loans (Rs 1.2 lakh crore). The bank’s best home loan rates for new loans are now 7.5 per cent.
The cut in the benchmark rate is estimated to lower the bank’s annual interest income by about Rs 8,100 crore. Reducing savings deposit rates is the most immediate way for SBI to limit that hit. The cut in savings deposit rates, in particular, provides quicker relief. With Rs 23 lakh crore in such accounts, the lower payout enables the bank to save an estimated Rs 5,750 crore annually.