- Interest rate lowered by 0.5% to 3.50% for balance up to Rs 50 lakh
- For balance of Rs 50 lakh and above, rate remains steady at 4% per annum
- More banks are expected to lower their interest rates
The country's largest lender, State Bank of India (SBI), on July 31 introduced a new two-tier savings account interest rate system, reducing interest rates for most of its depositors. On balances below Rs. 1 crore, SBI lowered the interest rate to 3.5 per cent from 4 per cent. On balances above Rs. 1 crore, the bank will continue to offer the rate of 4 per cent. "The decline in the rate of inflation and high real interest rates are the primary considerations warranting a revision in the rate of interest on savings bank deposits," SBI said in a statement. Real interest rate refers to interest rate an investor receives after adjusting for inflation. About 90 per cent of SBI's savings accounts have balances under Rs. 1 crore.
Another large public sector lender Bank of Baroda recently cut interest rate for savings accounts to 3.5 per cent on deposits of up to Rs 50 lakh.
In 2011, the Reserve Bank of India (RBI) had freed savings bank deposit rates. Commenting on SBI's rate cut, global brokerage Nomura said: "We see this as a bold move as first time after de-regulation of savings account deposits a big bank has changed savings account rates."