State Bank of India has announced the reduction in interest rates for term deposits. The bank reduced the rates in anticipation of reduction in repo rate by RBI on June 17 mid-term policy review.
The reduction in rates would only affect fixed deposits with maturities upto 8 month or below. The lender cut its rate for 3 months, 6 months, and 8 months term deposits by 0.25% to 7%, 7%, and 7.25% respectively. The rates for longer period have been left unchanged. These rates are only applicable for deposits below Rs. 15 lakh.
This might become the norm in the sector, since SBI's rates act as a benchmark for its peers.
There were speculations that given the slower growth in deposits compared to advances, the RBI may pause.
But Subir Gokarn, Dy. Governor RBI has hinted that there might be a fall in the rates. This move will give SBI some space to cut its lending rate if RBI do slash repo rate.
SBI recently reduced the lending rates on mortgage loans, but without changing the benchmark base rate. The lender charges 11.25% on such rates, which is the cheapest in the category.