With effect from May 1, the country's leading state-run lender State Bank of India (SBI) will link its key pricing for savings bank deposits and short term loans to the RBI's repo rate. Repo rate is the rate at which the central bank lends funds to commercial banks. In the last monetary policy review meet, the RBI lowered repo rate by 25 basis points to 6% from the earlier 6.25%. 1 basis point is one-hundredth of a percentage point.
And consequently, customers of SBI's savings bank deposits with balance over Rs. 1 lakh will get lower interest rate. The interest rate now will stand at 3.25%, which is 2.75% lower than the repo rate.
Also read: Impact of the move on short term borrowers
For savings account with balances up to Rs. 1 lakh, the bank will provide an interest rate of 3.50% per annum.
The move is to enable faster transmission of key policy rates and also address the issues concerning rigidities in the balance sheet.
"In order to insulate the small deposit holders and small borrowers from the movement of external benchmarks, SBI has decided to exempt Savings Bank account holders with balances up to Rs. 1 lakh and borrowers with cash credit or overdraft limits up to Rs. 1 lakh from linkage to the repo rate," the bank earlier said in a statement.
Also, this month SBI reduced interest rates on home loans up to Rs. 30 lakhs by 10 bps or 0.10%. With the decrease, new home loan rates stand between 8.60-8.90%. Also, the bank reduced its MCLR rate across tenures by 0.05% or 5bps. MCLR for one-year tenure is 8.5%.