State Bank of India (SBI)'s new interest rate applicable to balances above Rs 1 lakh in its savings accounts came into effect from Wednesday. The move by the country's largest bank lowers the interest payable to its customers holding balances above Rs 1 lakh in savings accounts (SBI interest rate for savings account). Mumbai-based State Bank of India has lowered the interest rate to 3.25 per cent from 3.5 per cent on savings bank accounts with a balance of Rs 1 lakh and above, according to the lender's corporate website - www.sbi.co.in.
However, the interest rate applicable to savings accounts with a balance up to Rs 1 lakh continues to remain at 3.5 per cent, according to the SBI website.
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State Bank of India plans to link the interest rate to the Reserve Bank of India (RBI)'s repo or short-term lending rate, in order to ensure a faster monetary policy transmission. The current rate of 3.25 per cent on savings bank accounts with Rs 1 lakh or more has been arrived at as the bank aims to pay interest at a rate 275 basis points - or 2.75 per cent - lower than the repo rate, which currently stands at 6 per cent.
The interest rates on the savings bank accounts may move up or down depending on how the central bank tweaks key interest rates.
Till Tuesday, April 30, SBI paid interest at a rate of 3.5 per cent for savings bank deposits up to Rs 1 crore and at 4 per cent for deposits above Rs 1 crore.
SBI also said that all cash credit accounts and overdrafts with limits above Rs 1 lakh will also be linked to the benchmark policy rate, plus a spread of 2.25 per cent.
"The Risk premiums over and above this floor rate would be based on the risk profile of the borrowers, as is the current practice," according to the SBI website.
SBI's domestic savings bank deposits stood at Rs 10.64 lakh crore at the end of December 2018.