With many lenders cutting interest rates on their savings account deposits, mutual fund houses have been able to sell low-risk products and tap into retail savings, says ICRA. Last month, State Bank of India reduced it’s interest rates by 50 basis points to 3.5 per cent for savings deposits of less than Rs one crore. Subsequently, several other public and private sector banks cut their savings deposits rates by 50 basis points. “This is expected to create an opportunity for liquid mutual funds to tap into retail savings, by providing an avenue for parking surplus liquidity while earning a premium over savings rate,” rating agency ICRA said in a report today.
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