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SBI cuts deposit rates by 25 basis points across the board

15 Jun 2009 Evaluate

State Bank of India has announced an across-the-board 25 basis point cut in deposit rates effective June 15. This move by the largest bank in the country is seen as a precursor to a lending rate cut, as the bank’s asset-liability management committee is likely to meet in the next 10 days. Following the cut, a one-year fresh fixed deposit (FD) with SBI will fetch 6.25 per cent (6.50 per cent earlier) interest and the popular 1,000-day deposit scheme will earn 7.50 per cent (7.75 per cent). This is the third cut in deposit rates by SBI in the current fiscal; rates were cut by 25 and 50 basis points each in April and May.

 

Over the next fortnight, public sector bank chiefs are expected to cut lending rates by 25 to 100 basis points. UCO Bank is likely to cut its prime lending rate by 100 basis points by the end of this month, according to its CMD, Mr S. K. Goel. The bank’s PLR stands at 12.5 per cent. The bank’s asset and liability committee is scheduled to meet on June19.

 

While the impact of a cut in lending rates is immediate, that in deposit rates is reflected only with a lag. The NIMs of most PSU banks have fallen below 3 per cent in the last quarter of the just ended fiscal, due to the successive cuts in PLRs. PLRs of public sector banks are in the 11-12.5 per cent range. SBI’s benchmark prime lending rate is 12.25 per cent.

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