The country's largest bank, State Bank of India has reduced its interest rates on domestic fixed deposits by 1 percent. Over the last six months, the bank has cut its fixed deposit rates five times. The new rates will apply from September 7, 2012.
Announcing the rate cut and explaining its reason, the Chairman of State Bank of India, Mr. Pratip Chaudhuri said, "From April 1 till August 31, our deposits have grown by about Rs 78,000 crore while our loans have grown only by about Rs 20,000 crore. The pipeline for loan growth in large credit is rather dry; hence, we want to go slow on deposit mobilization."
He further said that the bank is not going to cut its base rate. At present its base rate is 10 percent. Base rate is the minimum lending rate below which the banks can not lend money.
For term deposits below Rs. 15 lakh, the bank is offering 6.5 percent interest rate on all deposit slabs which have a maturity period of less than 1 year. For deposits of the same amount but which have maturity periods of more than 1 year to 10 years, the bank is offering interest rate of 8.5 percent.
Similarly, on all term deposits of Rs. 15 lakh to less than Rs. 1 crore which mature in less than 1 year, the bank is providing interest rates of 7.5 percent. It is providing rates of 8.5 percent for deposit slabs with maturity periods of more than 1 year up to 10 years.