State Bank of India, India’s largest bank, has cut interest rates on its fixed deposits by 0.25% across all terms. This change is effective from May 4, 2009.

With this change, the highest interest rate offered by SBI for fixed deposits is 8.25% for a term of 8 years to 10 years. Investors can also get an interest rate of 8.00% for fixed deposit terms of 1000 days and 5 years to 8 years.

Fixed deposit rates offered by SBI are not attractive at this time when compared with the fixed deposit interest rates offered by other banks in India. The highest interest rate on fixed deposits of 9.50% is currently offered by City Union Bank for a term of 3 years. Development Credit Bank, Tamilnad Mercantile Bank and City Union Bank are all offering interest rates of 9.25% for various terms.

Even among fixed deposits in public sector banks, the interest rates offered by SBI do not compare well. State Bank of Indore and State Bank of Travancore are offering an interest rate of 9.00% for terms of 5 years - 10 years and 1000 days respectively.

Investors can certainly get better rates on their fixed deposits in many banks (public sector, private sector and foreign banks) than those offered by SBI currently.

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