The State Bank of India (SBI) on Wednesday cut interest on savings bank accounts to 3% and also waived its minimum balance requirement as it set the trend of lowering interest rates in the banking sector. The country's largest lender has 44.51 crore savings bank (SB) accounts.
More banks are likely to follow to the market leader in slashing interest rate on SB accounts and waiving minimum balance requirements.
Earlier in the day, SBI reduced its fixed deposit rates and marginal cost of funds-based lending rates (MCLR) for various tenors.
Keeping in mind the 'Customers First' approach, the bank said it has also waived SMS charges, which will bring significant relief to all the customers.
"Bank has also rationalised interest rate on SB Account to a flat 3% p.a. for all buckets," it said in a statement.
Currently, the interest rate on SB accounts is 3.25% for deposits up to Rs 1 lakh in SB accounts and 3% for deposits above Rs 1 lakh.
SBI said it has decided to waive maintenance of Average Monthly Balance (AMB) for all SB accounts. "The charges on maintaining AMB are now waived off on all 44.51 crore SBI savings bank accounts," it said.
Currently, SBI customers need to maintain AMB of Rs 3,000, Rs 2,000 and Rs 1,000 in metro, semi urban and rural areas, respectively. The bank used to levy a penalty of Rs 5 to Rs 15 plus taxes on non-maintenance of AMB.
SBI had introduced penalty on breach of minimum balance in SB accounts in April 2017 after 2012. However, later in October it slashed the penalty amount.
Making it the second reduction in as many months, the public sector bank reduced interest rates for retail term deposits (less than Rs 2 crore) by 10 to 50 basis points for a few tenors.
Fixed deposits (FDs) maturing between seven to 45 days will offer an interest rate of 4% as against 4.50% earlier. Interest rates on FDs maturing in a year and above have been reduced by 10 basis points.
One-year to less than two-year tenor FD will earn an interest rate of 5.90% against 6% earlier. FD for similar tenor will fetch an interest rate of 6.40% instead of 6.50% for senior citizens.
The bank has also reduced interest rates on bulk term deposits (Rs 2 crore and above) by 15 basis points for 180 days and above tenors.
FD rates in the bulk category for tenor of one-year and above will earn 4.60% instead of 4.75%.
In February, the bank had slashed term deposits rates by 10-50 basis points in the retail segment and 25-50 basis points in the bulk segment. Further, the one-year MCLR has been reduced by 10 basis points to 7.75% from 7.85% earlier, the bank said.
This is the 10th consecutive cut in MCLR by the bank in the current fiscal.
Private sector lender ICICI Bank on its website said the savings account interest rate is 3.5% for end of day account balance of below Rs 50 lakh, and 4% for balance of Rs 50 lakh and above.
Several private sector lenders have minimum balance requirement of at least Rs 10,000.