SBI cuts short-term fixed deposit rates

State Bank of India (SBI), the country's largest bank, has reduced the short-term fixed deposit rates by 25-50 basis points (bps). For deposits less than Rs 1 crore, the bank has cut the interest rate from 7.5% to 7% (from 7.5%) on term deposits with 7-179 days tenure.

It has kept interest rates unchanged for all other tenures. For deposits over Rs 1 crore, the bank has cut the rate by 0.25 percentage point. For seven to 60 days tenure, the interest rate has been reduced to 6.25%, while for tenure of 61 days to less than 1 year, the same has been reduced to 6.75%.

The new deposit rates are with effect from July 18. The deposit rate cut by SBI is significant given that recently the government removed the tax arbitrage debt mutual funds had over bank fixed deposits. The move is likely to increase inflows into short maturity bank FDs.