Bad News For State Bank of India Clients Who Use Savings Accounts

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The State Bank of India – SBI, short – announced that they’re planning to introduce a new two-tier savings account interest rate, starting with the very last day of July, significantly reducing interest rates for savings accounts and many other depositors.

To be more specific, for balances which are below Rs. 1 crore, the interest rate has be shrunken from 4 per cent to 3.5 per cent, while balance above Rs. 1 crore, the bank will stick to 4 percent, says a report from NDTV.

The reasons are serious!

“The decline in the rate of inflation and high real interest rates are the primary considerations warranting a revision in the rate of interest on savings bank deposits,” India’s biggest bank said in a statement,” SBI announced in an official statement.

At the moment, more than 90 percent of the savings accounts registered here have balances under Rs. 1 crore.

In the same statement, SBI revealed that they have cut the marginal cost of funds based lending rate, which also happens to be the bank’s lending rate, by 90 basis points effective since January 1, relying on the strength of large inflows in terms of savings, as well as current accounts after the demonetisation India went through some months ago.

Retailers will benefit from this

One of the main effects of the revision in savings would be SBI’s ability to maintain the marginal cost of funding or key lending at the current rates, which would help a big part of retail borrowers from various segments, like agriculture or affordable housing.

Of course, SBI shares were also affected after the announcement was made, by 3 per cent. According to analysts, the reduction in savings bank deposits will significantly help the lenders margins. And the bank is also expected to be a trend setter, as other banks would mimic their move as well, cutting interest rate on savings bank deposits.

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