SBI cuts FD rates by up to 50 basis points
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 State Bank of India has cut its deposit rates. Earlier this month, it reduced rates by 0.25 percentage points.
A senior State Bank of India official said the bank has cut fixed deposit (FD) rates to bring down the cost of funds, so it can reduce the lending rates. This year, State Bank of India 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 prime lending rate (PLR), it has reduced lending rates on home loans, education loans and auto loans, not linking them with prime lending rate (PLR). This has benefited new customers, but old customers continued to pay higher interests on loans, which are linked with the prime lending rate (PLR).
He said as the cost of old deposits continued to be high, the State Bank of India was finding it difficult to pass on the benefit of current low interest rate to the old borrowers. The State Bank of India needs to have a net interest rate margin of 3% for a healthy operation. If prime lending rate (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 State Bank of India will cut the prime lending rate (PLR).
Interestingly, the interest rate of 3.25% on fixed deposit (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.
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SBI - with lone rates they are cutting FD rates too
i think one should apply for loan in SBI and do Fixed deposit in Other banks like Co-operative banks or private sector banks ( because they give high interest on FD that PSU )
forget about FD’s in banks , play in share market .one can gain more in share market than FD’s in bank