 "SBI cuts bulk deposit rates by 1.25-1.9%")
State Bank of India (SBI), the country’s largest lender, on Wednesday cut interest rates by 1.25-1.9 percentage points on bulk term deposits across different maturities in view of huge amounts pouring into bank accounts thanks to demonetisation.
This will predominantly impact non-retail customers – businesses and institutions – which place large amounts with banks.
The new rates for bulk deposits (Rs 1 crore and above) will be effective from November 24.
SBI has total domestic deposits of Rs 17.68 lakh crore and bulk deposits account for 8% or Rs 1.4 lakh crore.
The revision in interest rate comes on the back of a surge in money deposited in current and savings accounts. SBI received about Rs 1 lakh crore between November 10 and November 22. About 75% of it has come into savings accounts and the rest in current accounts, a senior SBI executive said.
There is huge surplus in the system as people began to deposit large amounts in the wake of the government's decision to scrap old high-denomination notes.
As credit growth is not picking up, there is a challenge to deploy the new funds that are coming in. While the bank is investing these excess funds into bond markets, the returns are less as yields have fallen substantially, an SBI executive said.