The State Bank of India has reduced the interest rate on savings accounts by 0.50% on deposits below Rs 1 Crore. However, the rate of interest for those accounts that maintain a balance of more than Rs 1 Crore would not be affected. Prior to this move, the bank offered an interest rate of 4% on all savings accounts. But now, account holders with amount less than Rs 1 Crore in their savings accounts will get interests at a rate of 3.5%. This two-tier rate structure would be implemented with effect from 31st July, 2017.
SBI said in a regulatory filing that the decline in inflation rate and already high real interest rates were primary reasons for the revision in savings account interest rate. It also said that the move will allow the bank to maintain the marginal cost of fund based lending rate (MCLR) at current rates.
Analysts have taken this move as a positive one as it will help SBI in increasing its margins. SBI has always initiated the rate cuts after which many public as well as private sector banks follow its path. It is quite possible that many banks would follow this suit as well. SBI’s stocks went up by around 5% to Rs 312.65 after this announcement.