State Bank of India (SBI) has introduced the new concept of RBI’s benchmark Repo rate linked Saving Bank Account Interest Rate. SBI has announced to link all the Savings bank account having more than Rs 1 lakh balance with the RBI’s repo rate for interest payment.
The linking of repo rate based interest rate will impact the loss of 0.25% less interest from 1st May 2019 to all the saving bank account holder of bank with balance more than Rs one lakh.
However, SBI savings bank account holders with less than Rs 1 lakh balance will continue to get 3.5 per cent interest on deposits.
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Additionally, the bank has announced that all overdraft/cash credit accounts with limits above Rs 1 lakh will also be linked to the benchmark policy rate, plus a spread of 2.25 per cent.
The updated rate of interest for State Bank of India Saving bank account holders are :
- The interest rate on savings bank accounts with balances above Rs 1 lakh will be 2.75 per cent below the RBI’s repo rate, which currently stands at 6 per cent.
- Hence, the SBI will give 3.25 per cent interest on savings bank deposits with a balance exceeding Rs 1 lakh. At present, the interest rate is 3.5 per cent. The interest is paid quarterly.
SBI has informed that the interest rate on such balances will go up in case the Reserve Bank hikes repo rate (the rate at which it lends to banks). It is assumed that the rate may fall further if the repo rate continues its downward journey.
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In December 2018, the RBI had proposed that floating interest rates on personal, home, auto and micro and small enterprises (MSEs) loans should be linked to external benchmarks like repo rate or treasury yields, from April 1, 2019 which was later deferred.
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Currently banks are following a system of internal benchmarks, including Prime Lending Rate (PLR), Benchmark Prime Lending Rate (BPLR), Base rate and Marginal Cost of Funds based Lending Rate (MCLR).
