Pre-cursor to rate cut, SBI aggressively slashes bulk deposit rates

In a first ever move post-demonetisation country’s largest commercial bank, State Bank of India has slashed its bulk deposit rates between 1.5 to 1.9 per cent across various maturities in a pre-cursor move towards a lower rate environment.

Late evening on Wednesday, November 23, SBI made an aggressive pitch for a lower interest rate regime when it went ahead with the rate cut move. The new rate is effective from Thursday, November 24, 2016. Bulk deposits refer to those between Rs 1 crore and Rs 10 crore.

The rate cuts are the lowest for deposits with a maturity period between 7 and 45 days where the new rate is 3.75 per cent (slashed by 125 bps). The rate cuts are highest for the deposits with a maturity period between 180 and 210 days, which now stands at 3.85 per cent (slashed by 190 bps). Interest rates on deposits maturing between 211 days to one year has been cut to 4 per cent (slashed 175 bps). For deposits from one to three years rates now stand at 4.25 per cent, slashed 175 bps).

With demonetisation, banks have been flooded with deposits which will bring the cost of capital down and ultimately lead to decrease in interest rates.

Shares of SBI were trading with gains of close to 2 per cent to Rs 262.2 on NSE at the time of writing this report.