After the RBI has cut key repo rate by 25 basis points to 5.75%, the interest rate on SBI's large savings deposit account will go down. Also, the interest rate for short term loans including cash credit and overdraft facility will reduce.
For better transmission of key rates into the system, the largest state-run lender SBI from May 1 has migrated to a new interest rate regime. As part of which, SBI has linked its interest rate on savings account with deposits over Rs. 1 lakh and short term loans to repo rate. And with it, whenever there is any change in the key repo rate by the RBI, it automatically gets reflected in the interest rates of these SBI products.
SBI savings account holders with deposits of more than Rs. 1 lakh earn an interest rate of 275 bps or 2.75% below the repo rate from May 1. So, the effective interest rate on savings account with large deposits after RBI's rate cut today will become 3%.
Other savings account holder of the bank with deposits less than Rs. 1 lakh will continue to earn 3.5% interest rate.
For other category of product i.e. short term loans with limits of more than Rs. 1 lakh, the lender has linked rates with the repo rate plus a spread of 2.25% that amounts to total 8%.