On 31 July, State Bank of India (SBI), the country’s largest lender, cut the interest rate on savings account deposits from 4% to 3.5% per annum for deposits up to Rs1 crore. For deposits above Rs1 crore, account holders continue to earn 4%. Here is a look at what it means for you and what you should do.
Savings rate
Till 2010-11, the interest rate on savings account deposits stood at 3.5%. In October 2011, the Reserve Bank of India (RBI) deregulated interest rate on savings accounts. This allowed banks to set their own interest rates. From 2011-12 onwards, a majority of the large commercial banks offered an interest rate of 4% irrespective of the deposit amount.
However, then relatively newer banks such as Yes Bank Ltd and Kotak Mahindra Bank Ltd started offering higher interest rates of 6-7%. Even today these banks offer a higher interest rate compared with large commercial banks such as SBI, ICICI Bank Ltd, Punjab National Bank and Bank of Baroda. Smaller and mid-sized bank also offer a higher rate than SBI. For instance, RBL Bank Ltd offers 5.50% for up to Rs1 lakh. Till 31 July, the interest rate on deposits above Rs1 crore but up to Rs5 crore stood at 7.10%. Effective 1 August, it is reduced to 6.75%. Differentiated banks too offer higher rates. For instance, Airtel Payments Bank Ltd offers 7.25% on savings deposits.
