India’s largest lender the State Bank of India (SBI) has become the first Indian bank to link its interest rates on saving bank deposits and short term loans to the repo rate of the Reserve Bank of India (RBI).
As per SBI’s formula, this move will make the current interest rate from May 1 on savings deposit above Rs one lakh to come down to 3.25 percent from 3.5 per cent. At present, the repo rate which is the interest rate at which RBI lends money to the banks is 6 percent.
For saving bank deposits of above Rs one crore, the new rate will come down to 3.75 percent from that of four percent earlier.
The linking of short-term loans with a limit of above Rs 1 lakh will now attract an interest rate close to 8.25 percent