State Bank of India cuts interest rates on deposits by 0.25 per cent

State Bank of India (SBI), the country's largest lender, on Friday cut its deposit rates for maturities of over one year by 0.25 per cent, making it the third bank, after private sector rivals ICICI Bank and HDFC Bank, to reduce deposit rates this week.

SBI, which has already affected rate cuts in the short-term maturities of up to a year in two moves over the past few months, reduced the rates for deposits of over one year on Friday.

Under the revised pricing applicable from Monday (December 8), a deposit in the state-run bank for over one year but less than five years will fetch an interest of 8.50 per cent as against the earlier 8.75 per cent.

For deposits of five years and above, the rate has been reduced to 8.25 per cent as against the earlier 8.50 per cent, SBI said in a filing to the bourses.

The review is for retail deposits of under Rs 1 crore, the PSU lender said.

The move comes within days of Reserve Bank of India (RBI) Governor Raghuram Rajan going public with his disappointment on banks for not transmitting the policy actions to the general public through lending rate cuts.

Rajan had said there has been a fall in rates in the money markets due to a variety of reasons, including an expectation that the RBI will become more accommodative in the future, but the banks' rates are not reflecting the same.

Defending the bank, SBI chairperson Arundhati Bhattacharya had said, "Banks get very little resources from the money market. For instance, SBI does not have a single CD (Certificate of Deposit) in the market and so to that extent the rates coming down in the money market won't really impact us. Therefore, there is no question of transmission."

The move comes a day after two private sector banks announced cuts of up to 0.50 per cent in maturities of up to one year. State-run IDBI Bank had also on Thursday announced 0.50 per cent cut in deposit rates for maturities starting from 6 months to 20 years.

The rate cuts are important as these are generally a precursor to a drop in borrowing rates.