SBI slashes interest on savings account to 3%; waives average monthly balance in accounts

Move should be seen in the context of excessive liquidity with banks; minimum balance waiver could spur savers to spend money in a boost for consumption

Kumar Shankar Roy Mar 11, 2020

SBI MF logoKeeping money in savings bank (SB) account of country’s largest lender SBI will fetch you a 3% per annum interest. To compensate, State Bank of India has also waived off the maintenance of Average Monthly Balance (AMB) for all SB accounts, besides waiving the SMS charges levied on a quarterly basis.

Previously, SBI used to pay 3.25% p.a. interest for keeping upto Rs 1 lakh in SB account and 3.00% p.a. for amounts above Rs 1 lakh in SB account.

The bank said the charges on maintaining AMB will now be waived off on all 44.51 crore savings bank accounts.

At present, savings account holders with SBI are required to keep an AMB of Rs 3,000, Rs 2,000 and Rs 1,000 in Metro/Urban, Semi-Urban and Rural areas, respectively. Previously, SBI used to impose a penalty ranging from Rs 5 to Rs 15 along with taxes, for the non-maintenance of AMB. But with waiver of AMB, you as a SB account holder now get practically get a zero-balance account.

Announcing the waiver, SBI Chairman Rajnish Kumar said, “This announcement will bring in more smiles and delight to our valuable customers. Waiving AMB is SBI’s yet another initiative to provide customers with more convenience and elated banking experience. We believe this initiative would empower our customers towards banking with SBI and boost their confidence in SBI.”

Importantly, SBI has also rationalised interest rate on SB account to a flat 3 % p.a. for all buckets. The move should be seen in the context of excessive liquidity with banks.

It is both an irony and contrast in fortunes for Yes Bank, where SBI is leading a reconstruction, as its customers wait to withdraw money lying in their accounts after the RBI imposed a rare moratorium. The prospect of many Yes Bank customers taking out every single rupee in their Yes Bank accounts is very real, once the moratorium is lifted (that could happen as early as March 15).

For savers who want access to liquid money, SB accounts remain the best source for keeping cash. With SBI now cutting SB account rates, expect all other banks to follow suit.

There is good news for borrowers. Earlier in the day, SBI had announced an upto 15 basis points (0.15%) cut in its MCLR or marginal cost of fund-based lending rate across various tenors effective March 10. This move will make home and auto loans cheaper. SBI has reduced its one-year MCLR by 10 basis points to 7.75%, from 7.85% earlier. This is 10th consecutive cut in MCLR by the country’s largest bank in the current financial year.

SBI also today cut interest rates on fixed deposits or FDs for second time in a month. The revised rates came into effect from March 10.

According to the latest rates, SBI FDs for general public between 7 days to 45 days will now fetch 4%, from 4.5% earlier.

Similarly, FDs between one year to less than 5 years, will fetch 5.9%, from 6% earlier.

SBI fixed deposits between 5 years and up to 10 years will now fetch 5.9% from 6% earlier.

Senior citizens get 50 basis points extra than general public.

Please note these rates are applicable on retail fixed deposits of less than Rs 2 crore.

Kumar Shankar Roy

Kumar Shankar Roy is contributing editor with RupeeIQ. Kumar is a financial journalist, with a functional experience of 15 years. He tracks mutual funds, insurance, pension, PMS, fixed income/debt and alternative investments markets closely. He has worked for The Times of India, The Hindu Business Line, Deccan Chronicle Group, DNA, and Value Research, among others, across different cities in India. He is deeply interested in marrying data insights with actionable opinion. He can be contacted at [email protected].

Subscribe to our newsletter

Envolpe image

Want to grow your money?

Subscribe & keep learning!

 ⓘ Find the best performing mutual funds Explore

Mohammed Haseeb