SBI cuts fixed deposit rates by up to 50 bps
Move Second In A Month, Sixth This Year New Delhi: The State Bank of India has cut its fixed deposit (FD) rates across maturities by up to 50 basis points (100 basis points = 1%), effective from May 18. This is the second time in this month, and sixth time in 2009 that SBI has cut its deposit rates. Earlier this month, it reduced rates by 0.25 percentage points. A senior SBI official said the bank has cut FD rates to bring down the cost of funds, so it can reduce the lending rates. This year, SBI has reduced its prime lending rate (PLR) only once in January by 0.75 percentage points. The official added that though the bank has not cut PLR, it has reduced lending rates on home loans, education loans and auto loans, not linking them with PLR. This has benefited new customers, but old customers continued to pay higher interests on loans, which are linked with the PLR. He said as the cost of old deposits continued to be high, the bank was finding it difficult to pass on the benefit of current low interest rate to the old borrowers. The bank needs to have a net interest rate margin of 3% for a healthy operation. If PLR was cut and the benefit was given to old customers, the official said, the margin would fall substantially, which might affect the bank’s profitability. Therefore, he said, once the net cost of fund would be brought down, the bank will cut the PLR. Interestingly, the interest rate of 3.25% on FD of the shortest tenure between 15 days and 45 days is lower than that on the saving accounts at 3.5%. The official said this was done keeping in mind the current account holders, who get zero interest on savings account. They normally park their surplus fund with 15-45 days FDs to earn deposits. --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [email protected] For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en -~----------~----~----~----~------~----~------~--~---
