Yesterday State Bank decided to link its short-term loans and large savings deposits rates to the repo rate, chairman Rajnish Kumar Saturday said loans and deposits below Rs 1 lakh will continue to be linked to the present MCLR to protect retail customers from market vagaries.
In a first, the nations largest lender had Friday said from May 1, it would link its savings accounts with deposits over Rs 1 lakh and all cash credit accounts and overdrafts or short term loans with limits above Rs 1 lakh or short-term loans, to the repo rate, which
currently is at 6.25 percent.
At present some banks like Kotak Mahindra, Yes Bank, RBL Bank and Singaporean lender DBS Bank pay higher interest to the tune of 5-6 percent on savings deposits regardless of the balance, while large players like SBI NSE -0.20 % and other staterun lenders, and private players like HDFC Bank, ICICI Bank and others pay 4 percent per annum.
From May 1, the savings bank deposits with balance above Rs 1 lakh will earn an interest of 3.5 percent, 2.75 percent lower than the repo rate and lower amounts in balance will earn 4 percent.
The bank has also linked all cash credit accounts and overdrafts with limits above Rs 1 lakh to the repo rate plus a spread of 2.25 percent.