SBI cuts rates on deposits 25-100 bps, not on loans

State Bank of India (SBI) has slashed interest rates on retail term deposits by 25-100 basis points (bps) across tenures —- the deepest cut the industry has seen since the Reserve Bank of India cut the repo rate by 50 bps last week.

The move will help bring down its cost of funds.

SBI chairman Pratip Chaudhuri had said earlier that deep lending rate cuts will be announced in the auto, corporate and small and medium enterprises (SME) segments.

However, the country’s biggest lender announced no such reduction on Monday, though the Street was abuzz it had lowered the SME rates by a whopping 200 bps.

The bank’s base rate, or the minimum lending rate, also remained untouched.

“It is quite surprising that SBI has cut deposit rates but has base rate untouched. But we can expect that they will go for base rate cut also in the near future in the range of 25-50 basis points. In domestic operations, SBI is earning higher margins than other banks. The move to cut deposit rates will support margins further,” said Rajiv Mehta, analyst, India Infoline.

Just late last month, SBI had announced a 25-100 bps hike in rates for deposits maturing within one year.

Several banks have cut deposit rates since the RBI move. While ICICI Bank cut deposit rates by 25 bps effective Monday, Lakshmi Vilas Bank has announced a cut of 25-50 bps in select tenures. Corporation Bank, too, has announced a cut of 25-200 bps across maturities effective Wednesday.

Others, however, had deferred their decisions until SBI showed hand.