SBI cuts short-term deposit rates

MUMBAI: Despite a rise of 100 basis points in inflation, the country’s largest bank and often the trendsetter, State Bank of India (SBI), has cut interest rates on short-term deposits by 25 basis points. Interest rates on SBI’s medium to long term deposits remain unchanged.

SBI has also decided not to accept bulk deposits of Rs 15 lakh and above for shorter tenors -from 7 to 14 days.

In a press statement, SBI said that short term deposits maturing between 15 days and 45 days is lowered to 3.75%, from 4% and deposits from 46 days to 179 days is reduced to 4.25%, from 4.5%. SBI will continue to offer old rates for all other maturities and a maximum rate of 5.25% for three years and above.

The move to reduce the rates came as a surprise given the fact the yields on government securities have risen by around 115 basis points since the beginning of this fiscal. In fact, home loan leader HDFC has already hiked the rate on fixed interest loans.

Rather than factoring in the inflation impact at this point, SBI is more bent on discouraging short-term inflows. The bank had received huge inflows in short term deposits as the announcement of a transaction tax turned investments in mutual funds, bonds and equities market unattractive.

Almost 60% of funds mobilised by mutual funds are from large corporates. But thanks to the uncertainty over taxation on mutual funds and debt securities, several corporates had turned bank deposits.