State Bank of India slashes rates by 50 basis points
The country's largest lender, State Bank of India, has slashed its interest rates by up to 50 basis points (bps) for various maturities to ward off high-cost deposits. Taking a cue, Bank of Baroda reduced its deposit rate by 10-25 bps and Canara Bank also reduced its one-year fixed deposit rates to 6.9%. Here's all you need to know about the upcoming changes.
Largest public sector lender does a balancing act
Rajnish Kumar, MD, SBI, said, "Savings bank deposits have been flowing out so we have to do a balancing act. Credit growth is also sluggish at just 4% for the banking sector as a whole, so there is no point holding on to these high cost deposits." These new rates will be applicable only for fresh deposits and existing deposits following their renewal.
Revisions on the current interest rates
SBI has slashed two-to-three years segment rates by 50 basis points for senior citizens and deposits above three years fell 25 basis points, while other interest rates remained the same. The public sector lender has kept its marginal cost of lending rates (MCLR) the same but a minor cut can be expected in the near future.
Canara Bank slashes its rates too
Canara bank also reduced its rates and by chipping off 0.10%, its one-year fixed deposit rates came down at 6.9%, keeping in tandem with ICICI Bank and HDFC Bank. A senior official of the Bangalore-based bank said to DNA,"With poor credit growth banks do not want to keep high-cost deposits. If they have to reduce lending rates, the deposit rates have been aligned accordingly."
Punjab National Bank's revised rates
Punjab National Bank has also revised down its MCLR by 0.10-0.15% and now for one-year it's rate stands at 8.35%, for three years at 8.50% and for six-month tenure, the new rate stands at 8.30%. Now, what remains to be seen is, what percentage of cuts will be initiated by other banks in the near future.
SBI is gearing up for more, post successful merger
State Bank of India has recently completed a successful merger of its five associates, but it appears that it intends to scale up its operations further in the near future. A senior official informed BS that Finance Ministry "will soon undertake a broad study on further consolidation and look at various options for merger among the remaining 21 public sector banks."
