A large section of country's middle class who keep their savings in salary accounts is likely to feel the pinch as private and public-sector lenders have announced a sharp cut in interest rates on savings deposits.
The interest rate cuts were announced after RBI slashed repo rate in its bi-monthly monetary policy statement on August 2. Only SBI had announced the interest rate cut on savings bank accounts on July 31, even before RBI's announcement.
India's largest private-sector lender HDFC Bank today joined the long list of lenders that have announced a cut in interest rates on savings account.
The interest rates on savings account was cut down by 0.5 percent to 3.5 percent from 4 per cent earlier for deposits below Rs 50 lakh. For deposits above Rs 50 lakh, the interest rate would remain unchanged at 4 percent.
The new rates would be effective from August 19 and will be applicable to both resident and non-resident customers.
Country's largest lender, the State Bank of India (SBI) was the first to slash interest rates on savings account deposit by 0.50 per cent to 3.5 per cent for balance up to Rs 1 crore. The lender said it will continue to pay 4 per cent on savings bank accounts with deposits of above Rs 1 crore.
Just yesterday, Private sector lender Yes Bank reduced the interest rate on savings bank accounts by 1 per cent to 5 per cent for deposits of less than Rs 1 lakh. However, the bank will continue to pay 6 per cent interest on deposits of over Rs 1 lakh and less than Rs 1 crore. The bank has also slashed interest rate on savings accounts to 6.25 per cent from existing 6.5 per cent for deposits over Rs 1 crore. The new rates would be effective from September 1.
On August 8, private-sector lender Axis Bank announced a 50 basis points cut in interest rates on savings account to 3.5 per cent. However, the bank said it will continue to pay 4 per cent interest on deposits of above Rs 50 lakh.
Bank of Baroda
Bank of Baroda became the second bank to cut interest rates on savings account deposits. The bank also adopted a two-tier savings bank interest rate mechanism. The rate offered on deposits up to Rs 50 lakh was cut from 4 per cent to 3.5 per cent. The rate above Rs 50 lakh was not changed.
Karnataka Bank also reduced the interest rate to 3.5 per cent from the existing 4 per cent for daily balance in the range of more than Rs 1 lakh to Rs 50 lakh, and for balances below Rs. 1 lakh, the revised rate is now 3 per cent from the existing 4 per cent.
PSU lender Indian Bank had said it will offer an interest rate of 4 per cent per annum on savings account with the incremental balance of over Rs 50 lakh and 3.50 per cent per annum for the deposit up to Rs 50 lakh. The new interest rate will be effective from August 16, 2017, the bank had said in a BSE filing.