SBI cuts rates on savings deposits below Rs 1 crore to 3.5% from 4%

State Bank of India (SBI), the country's largest lender, has decided to cut interest rate on savings account of upto Rs 1 crore by 0.5% (50 basis points) to 3.5% per annum from 4% with effect from 31 July, 2017.

The bank, however, has decided to retain rates for savings accounts with deposits of over Rs 1 crore at 4% per annum. This is the first ever cut in savings account rates since the Reserve Bank of India had deregulated savings account rates in 2011. S

BI has a deposit base of Rs 25.85 lakh crore and a total current and savings account ratio of 44.4% as of 31 March, 2017.

The bank decided to revise the interest rate due to cut in marginal cost of lending rate (MCLR) by 90 basis points to 8% effective 1 January, 2017 The reduction was on the back of large inflows in savings & current accounts during the demonetisation period in the months of November & December 2016, SBI said.

The decline in the rate of inflation, high real interest rates and the expected softening of interest rates are the other considerations warranting a revision in the rate of interest on savings bank, SBI said.

The bank offers to its customers the option of sweep facility in savings bank accounts under which the funds can be transferred automatically above a threshold balance in savings bank account to fixed deposits through online & branch channels, SBI added.

According to a top SBI official, the move will help enable the bank in maintaining MCLR at existing rates.

"The revision in savings bank rate would enable us to maintain the MCLR at the existing rates, benefitting a large segment of retail borrowers in SME, agriculture & affordable housing segments. We encourage people to move to fixed deposit rate as we expect less volatility and better facilitation due to our strong reach, distribution and franchise network. Reduction in rates was also important as it was difficult to maintain MCLR at the current levels," SBI national banking group managing director Rajnish Kumar said.