SBI cuts savings account interest rate, banking stocks rise

The State Bank of India stock on Monday rose after the lender announced slashing of interest on savings account deposits by 50 basis points to 3.5 per cent on balances of up to Rs 1 crore, ahead of Reserve Bank's policy review this week.

Other banking stocks followed suit since a cut in interest rate  on savings account would leave more cash in the hands of the state lender. 

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The BSE banking index surged 1.23 percent or 345 points at 28,367 level. 

Of the 10 stocks on the BSE bankex, YES Bank was the sole loser, down 2.14 percent.  State Bank of India was the top gainer (4.33 percent), followed by Bank of Baroda (2.38 percent) , ICICI Bank (2.06 percent), Punjab National Bank (1.86 percent), Kotak Mahindra Bank (1.77 percent, Federal Bank (1.19 percent), IndusInd Bank (0.85 per cent), Axis Bank (0.79 percent) and HDFC Bank (0.36 percent).

Bank Nifty rose 1.16 percent or 287.60 points at 25,098 level.

For savings account balance of Rs 1 crore or more, the bank will continue to offer 4 per cent interest.

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At 1444 hours, the SBI stock was trading 4 percent or 12 points higher at 311.10 points on the BSE.

The stock is up 24.51 percent or 61.25 points on an year-to-date  basis.

It has gained 35.28 percent or 81.15 points on an yearly basis.

The stock hit a 52-week high of 315 level on May 19, 2017. On  August 4, 2016, the stock hit an yearly low of 223.20 on the BSE.

The lender further said: "The decline in rate of inflation and high real interest rates are primary considerations warranting a revision in rates of interest on savings bank deposits." SBI said revision of saving bank rate will enable the bank to maintain marginal cost of fund-based lending rate (MCLR) at existing rates.