SBI cuts fixed deposit rates by up to 1%
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SBI cuts fixed deposit rates by up to 1%

Last Updated: Wednesday, September 05, 2012, 22:27
 
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SBI cuts fixed deposit rates by up to 1%
New Delhi: State Bank of India on Wednesday announced a cut of up to 1 percent in interest rate for fixed deposits across maturities, a development which may prompt other banks to follow suit.

"The new rates would be effective from September 7," State Bank of India, the country's largest bank said in a statement.

When asked about the reduction, SBI Managing Director and Chief Financial Officer Diwakar Gupta said, "The bank has taken decision to cut interest rates on term deposits as liquidity is comfortable."

The decision to cut fixed deposit rates would help the bank improve margins, he said.

For deposits between 241 days and one year, the downward revision is 1 percent. The new rate would be 6.5 percent as against 7.5 percent.

Of the total 9 maturity periods for fixed deposits, 0.5 percent downward rate revision is for six categories.

With the revision, the interest rate on 7-90 days fixed deposit would come down to 6.50 percent, from 7 percent.

Similarly, term deposit 91-179 days would be down by 0.5 percent, at 6.50 percent and 180 days fixed deposits would also attract 6.50 percent interest rate.

Fixed deposit with maturity of 181-240 days would now provide interest rate of 6.50 percent, down from 7.25 percent.

For one year to less than 2 year maturity period fixed deposits, the new rate will be to 8.5 percent as against 9 percent, down by 0.5 percent.

At the same time, interest rate for fixed deposits with maturity period between 2-3 years and 3-5 years has been slashed by 0.5 percent to 8.5 percent.

However, the bank has left interest rate unchanged at 8.5 percent for term deposit of 5-10 years.

SBI Chairman Pratip Chaudhuri said the move is aimed at protecting the margins as deposits have grown much faster than advances.

"From April 1 till August 31, our deposits have grown by Rs 78,000 crore, while loan growth is around Rs 20,000 crore. The pipeline for loan growth, particularly large credit, is rather dry. So, we thought of going slightly slow in deposit mop-up. If we did not do that, it could have impacted our margins," Chaudhuri told reporters in Mumbai this evening.

"Right now, this reduction will help us protect the margins. As you know, the loan market has migrated to the CPs (commercial paper) because of its rates (currently CP rates are in the range of 8.8-9.5 percent) compared to the base rate (currently at 10 percent and above). That's why, we have decided to go slow in deposit front."

On credit growth, Chaudhuri said he hopes to see 18-20 percent uptick despite the current slow pace of growth. He added the first quarter is usually weak.

PTI


First Published: Wednesday, September 05, 2012, 13:28


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