State Bank of India's move may affect millions of Gulf-based non-resident Indians
India’s largest commercial bank State Bank of India (SBI) on Monday announced a cut in interest rates it offered on various term deposits with the bank, a move which may affect millions of Gulf-based non-resident Indians who hold large amounts in Rupee term deposits in various Indian banks.
SBI will offer 20 basis points (bps) to 75 basis points lower interest rates on retail term deposits, bulk term deposits and shorter tenure deposits from August 1, the bank said in a statement.
Term deposits up to $290,480 (Rs 2 crore) fall under retail term deposits, while those above this limit come under bulk term deposits.
Term deposits made up to 179 days are classified as shorter tenor deposits.
For term deposits with longer tenors, there is a reduction up to 20 bps in the retail segment and 35 bps in the Bulk segment. Interest rates have been slashed by 50-75 bps for time deposits with shorter tenors, SBI said, adding that the decision is made in view of the falling interest rate scenario in India.
Rupee term deposits by non-resident Indians (NRIs), especially from the Gulf countries, form a sizeable part of deposits by Indian banks. The SBI statement, however, has not made it clear whether the proposed interest cut will be applicable to NRI Rupee deposits as well.
India’s central bank, Reserve Bank of India has cut repo rates – the rate at which it lends to banks – consecutively for third time in June by 25 bps each in its effort to bring down lending rates in India.
The repo rate currently is at 5.75 percent.
The cumulative 75 bps rate cut, however, failed to translate to a similar cut in lending rates by banks mainly on account of tight liquidity situation prevailing till few weeks ago, and higher deposit rates.
Banks have been under pressure to pass on the rate cut to customers, forcing them to lower interest rates on deposits.
Economists and corporate expect a further reduction in repo rate by RBI in its forthcoming monetary policy review meeting is slated for August 7. The expectation of further cut in interest rate is on the ground that such a move is needed to stimulate growth in the Indian economy, which has been seeing consistent contraction in the recent quarters.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.