The country’s largest lender, State Bank of India (SBI) on Tuesday lowered its savings deposit rates by 25 basis points (bps) to 2.75%, citing adequate liquidity. With effect from April 15, 2020, savings accounts will earn 2.75 percent an annum. 

On 11 March, SBI had lowered its savings bank interest rate to 3% for all customers. Earlier, it used to offer 3.25% on balances of up to ₹1 lakh, and 3% on above ₹1 lakh. Last month, it had also waived off maintenance of average monthly balance (AMB) for all savings bank accounts.

On Tuesday, SBI also announced a reduction in its marginal cost of funds-based lending rate (MCLR) by 35bps across all tenures. “The one-year MCLR comes down to 7.40% from 7.75% with effect from 10 April. This is the eleventh consecutive cut in MCLR in FY20.” Equated monthly installments (EMIs) on eligible home loan accounts (linked to MCLR) will get cheaper by around ₹24 per ₹1 lakh on a 30-year loan.

According to the SBI press release, the one-year MCLR comes down to 7.4 percent per annum from 7.75 percent, with effect from April 10, 2020. “This is the eleventh consecutive cut in MCLR in FY 2019-20. Consequently, EMIs on eligible home loan accounts (linked to MCLR) will get cheaper by around Rs. 24.00 per 1 lakh on a 30-year loan,” the press release stated.

Tenor Existing MCLR (In %) Revised MCLR (In %)*

Tenor Existing MCLR (In %) Revised MCLR (In %)*
Overnight 7.45 7.1
One Month 7.45 7.1
Three Month 7.5 7.15
Six Month 7.7 7.35
One Year 7.75 7.4
Two Years 7.95 7.6
Three Years 8.05 7.7

After the reduction in rates, savings accounts with balances up to Rs 1 lakh will earn 2.75 percent, down from 3 percent. The same is the case with balances above Rs. 1 lakh — they will earn 2.75 percent a year.

However, the reduction will not affect retail loans disbursed after 1 October 2019, when banks had moved to an external benchmark as directed by RBI. Banks can now choose between the repo rate, or the yield on three-month or six-month treasury bills, or any other benchmark rate published by the Financial Benchmarks India Pvt. Ltd. The move will help existing SBI retail customers who borrowed before October 2019, and corporate loans, which are yet to move to an external benchmark.

On 27 March, SBI had lowered its interest rates linked to external benchmarks by 75bps and cut its deposit rates between 20 and 100bps. In a statement, SBI had said its external benchmark-linked lending rate (EBR) and repo-linked lending rate (RLLR) now stands at 7.05% and 6.65%, respectively. This was after the RBI reduced its repo rate by 75bps to mitigate COVID-19 challenges.

Last week, private sector bank, ICICI Bank cut the interest rate on savings account by 25 bps. After the cut savings account with balance below Rs 50 lakh will earn 3.25 percent a year and an account with balance above Rs 50 lakh will earn 3.75 percent. The new interest rates will come into effect from April 9, 2020.

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