The interest rate on State Bank of India’s (SBI) one-year fixed deposits for less than Rs 1 crore has dropped to a seven-year low of 6.75% after the country’s largest bank trimmed the rate by 15 basis points (bps) earlier this month.
The last time SBI had offered the same rate on one-year deposits was between August 17 and October 1, 2010. The rate is now the lowest in the system for the one-year money. The latest round of cuts saw the rate on deposits of tenures between one year and 455 days fall 40 bps to 6.5% and that on deposits of tenures between 456 days and two years fall 25 bps to 6.5%.
With the latest cut in deposit rates on SBI, the real interest rate stands at 2.54%, considering a tax rate of 30% and the May CPI-based inflation reading of 2.18%.
The cuts in deposit rates come in the wake of lending-rate cuts on some categories of home loans at SBI, multi-year low levels in consumer price index (CPI)-based inflation and cuts in interest rates on small savings schemes. On June 9, SBI had reduced rates on home loans above Rs 75 lakh by 10 bps to 8.55% for women and 8.6% for others.