On 31 July, State Bank of India (SBI) cut the interest rate for its savings account from 4% to 3.5% per annum for deposits up to Rs1 crore. This move gains significance as SBI is the largest lender in the country and other banks could soon start following the example set by it. For deposits above Rs1 crore in savings accounts, SBI continues to offer 4%.
A few days later, the Reserve Bank of India (RBI) cut the repo rate by 25 basis points (bps), from 6.25% to 6%. Repo rate is the rate at which the RBI lends money to commercial banks. One basis point is one-hundredth of a percentage point. While this rate cut was widely expected and factored in, it is possible that other banks may cut deposit rates for savings or fixed deposits in the coming days.
While the interest rates are going down, it is important to recall that this is not the first time the rates have come to this level. Till 2010-11, for the largest five banks in India, the interest rate on savings account deposits stood at 3.5%.
