SBI cuts deposit rates

The State Bank of India (SBI) on Saturday cut its deposit rates by 0.50 per cent across all maturities. This cut means that the SBI now pays less for funds raised through deposits, giving it room to cut its loan rates by the end of the month. For example, effective from Monday, the SBI will offer only 7.5 per cent interest on its special 1000-day deposit scheme, down from 10 per cent when it was launched in 2008.

This is the fourth deposit rate cut by the public sector bank in the last three months and comes just a couple of days after finance minister Pranab Mukherjee asked the lenders to provide credit at reasonable rates to stimulate a slowing economy. Now that SBI has cut deposit rates, lending rate cuts are likely to follow. SBI chairman, Om Prakash Bhatt had indicated that a lending rate cut will come by the month end. Although the SBI has consistently cut deposit rates in the last three months, its main lending rate has not been touched since it was cut to 12.25 per cent, effective January 1.

Delhi-based Punjab National Bank’s main lending rate is the lowest in the country at 11 per cent. Other big public sector banks like Bangalore-based Canara, and Mumbai-based Bank of India and Bank of Baroda are also lower than SBI at 12 per cent.