November 11, 2008, Ratekhoj.com. State Bank of India, India’s largest public sector bank, has announced a reduction in its fixed deposit rates that will take effect from December 1, 2008. The cuts in the fixed deposit rates range from 25bps (0.25%) to 50bps (0.50%) for terms between 91 days and 10 years. This reduction in fixed deposit rates follows cuts in interest rates on loans by several banks in India recently.

State Bank of India has reduced its interest rate for the deposit period of 91 days to 180 days from 7.50% to 7.00%. Rates for a term of 181 days to less than 1 year have gone down from 8.50% to 8.00, while the rates for a term of 1 year to less than 2 years have gone down from 10.00% to 9.50%. Rate for a term of 2 years to less than 1000 days will be 9.00% reduced from 9.50% and fixed deposit rate for a term of 1000 days will be 10.00% from 10.50%. The interest rate for a fixed deposit with a term of 1001 days to less than 3 years will be 9.00% reduced from 9.50%. Fixed deposits with a term of 3 years to less than 5 years will now yield 9.25% down from 9.75% and those with a maturity of over 5 years upto 10 years will be 9.00% which is down 25bps from before (9.25%).

The rates quoted above are for fixed deposit amounts below Rs. 15 lacs. Fixed deposit investors have a chance to take advantage of the existing higher fixed deposit rates before the rates change on December 1. Other public sector banks are also expected to cut their fixed deposit interest rates in the next several weeks. Recent cuts by Reserve Bank of India to the key Cash Reserve Ratio (CRR) and short term lending (repo) rates are geared towarding a reduction in the interest rates for loans to spur growth in the economy. Banks are following up the reduction in loan rates with a cut in the interest rates for fixed deposits. An early announcement of the cuts in the fixed deposit rates gives people an opportunity to plan their fixed deposit investments before December 1.

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