FD rates on a downward spiral with SBI cutting rates by 50 bps more; others may follow suit

New lower rates effective from August 26, 2019; applicable to fresh deposits and renewals of maturing deposits The 50 bps cut means interest income will drop by up to Rs 46,300 for Rs 10 lakh FD

Staff Writer Aug 24, 2019

interest rate cutDespite assuring that SBI will strike a balance on what it pays to depositors and what it charges to borrowers, India’s biggest bank has further cut fixed deposit rates – the second such reduction on FD rates in less than a month. SBI has cut retail fixed deposit rates by 10-50 basis points across maturities. For those who rely on FD interest income, this is bad news. You will get lower interest rates with effect from August 26, 2019. RupeeIQ tells you what the interest reduction means.

How much interest rate reduction

First, let us tell you how much interest rate reduction has happened. The new rates of interest will be made applicable to fresh deposits and renewals of maturing deposits.

These are the latest FD rates (for below Rs 2 crore) for the general public.

In the seven days to 45 days, the new rate will be 4.50%, down 50 basis points (0.50%) from 5% earlier.

In the 46 days to 179 days, the new rate will be 5.50%, down 25 basis points from 5.75% earlier.

In the 180 days to 210 days tenure, the new rate is 6.00%, down 25 basis points from 6.25% earlier.

In the 211 days to less than 1 year tenure, the new rate is 6.00%, down 25 basis points from 6.25% earlier.

In the 1 year to less than 2 year tenure, SBI will now give 6.70%, down 10 basis points from 6.8% earlier.

In the 2 years to less than 3 years tenure, SBI fixed deposit will fetch 6.50%, down 20 basis points from 6.70% previously.

In the 3 years to less than 5 years bucket, you as depositor will get 6.25%, down 35 basis points from 6.60% earlier.

In the 5 years and up to 10 years tenure, you will get 6.25%, down 25 basis points from 6.5% previously.

Note: The interest rate payable to SBI Staff and SBI pensioners will be 1.00% above the applicable rate. The rate applicable to all Senior Citizens and SBI Pensioners of age 60 years and above will be 0.50% above the rate payable for all tenors to resident Indian senior citizens i.e. SBI resident Indian Senior Citizen Pensioners will get both the benefits of Staff (1%) and resident Indian Senior Citizens (0.50%).

The reduction in bulk deposits, above Rs 2 crore, have a seen a 30-70 basis-point cut across tenures. The steepest cuts have come in the 3-5 years and 5-10 year tenures.

How much will your FD interest income fall

Below we have tried to illustrate how a person, below 60 years of age and non-SBI staff, will be affected due to FD interest rate reduction. We have assumed the person has Rs 10 lakh in SBI FDs.

The interest rates on “SBI Tax Savings Scheme 2006(SBITSS)” Retail Deposits and NRO deposits will be aligned as per the proposed rates for domestic retail term deposits.

Do remember that the interest value is for general self-help planning only and are indicative in nature.

SBI FD rate cut

Additional Read: ‘As A Bank, We Have To Strike A Balance Between What We Pay To Our Depositors And What We Charge On Loans’, SBI Chairman Rajnish Kumar (Aug-2019)

Disclaimer: Views expressed here in this article are for general information and reading purpose only. They do not constitute any guidelines or recommendations on any course of action to be followed by the reader nor are they meant to serve as a professional guide/investment advice.

Staff Writer

This article is written by RupeeIQ editorial staff.

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Mohammed Haseeb