SBI to lower interest rates for short-term borrowers

MUMBAI: The country’s largest lender, State Bank of India (SBI), has effected the process for transmission of low interest rates to its borrowers and depositors.

In a late Friday decision, the bank announced that it has it linked interest rate on savings account with a balance above Rs1 lakh and short-term loans to the Reserve Bank of India’s (RBI) repo rate, effective from May 1.

This means that savings account interest rates and interest rate on a few loans will change as and when the regulator changes its repo rate.

The RBI’S current repo rate stands at 6.25 per cent. Repo rate is the rate at which banks borrow money from the Central bank.

With the changes, SBI has become the first bank to link its savings, deposits rates and short-term loans to the RBI’S repo rate. This is expected to speed up the monetary transmission process without much delays. SBI has done it on a suo motu basis.

Last month, RBI Governor Shaktikanta Das had asked the banks to lower interest rates following it repo rate cut. The new rates linked the external benchmark rate of the repo rate, will be effective from May 1, the bank said in a statement. SBI said it will link the savings bank deposits, with balance above Rs1 lakh to the repo rate with current effective rate being 3.50 per cent per annum, which is 2.75 per cent below the present repo rate.

The bank has also linked all cash credit accounts and overdrats with limits above Rs 1 lakh to the repo rate plus a spread of 2.25 per cent.