Shares of public sector undertakings (PSU) banks were trading higher by up to 4%, recovering from their intra-day lows, after the state-owned banking giant State Bank of India (SBI) cut saving bank interest rates.
SBI restructured by 2.7% to Rs 307 on BSE after the bank introduced a two-tier saving bank interest rate from today, due to the decline in the rate of inflation and high real interest rates.
“The Bank is introducing 2 tier saving bank interest rate from 31 July (Monday). While balance above Rs 1 crore will continue to earn interest rate at 4% per annum, the interest rate at 3.5% per annum shall be offered on balances of Rs 1 crore and below,” SBI said in its press release.
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 saving bank deposits, it added.
The revision in saving bank rate would enable the bank to maintain the MCLR (marginal cost based lending rates) at existing rates, benefiting a large segment of retail borrowers in SME, agriculture and affordable housing segments, it added.
SBI had cut the MCLR by 90 basis points effective 1 January 2017, on the strength of large inflows in saving and current accounts during the demonetization period in the month of November and December 2016. There has been a significant outflow of CASA deposits since then, SBI said.
Among the other PSU banks, Bank of Baroda, Indian Bank, Punjab National Bank, Bank of India, Union Bank of India and Canara Bank were up between 1% and 4% on BSE.