After lending rate cut, SBI makes steeper cut in deposit rates

State Bank of India (SBI) has reduced its lending rates by 10 basis points, but has slashed its deposit rates by up to 25 basis points.

The one year lending rate, to which most of the loans, both corporate and retail, are linked, would come down to 8.15% from 8.25% with effect from September 10, 2019. SBI has also realigned interest rate on term deposits (TD) from September 10.

The bank has slashed retail term deposit rates by 20-25 bps and bulk term deposit rates by 10-20 bps across tenors. For premature withdrawal, the depositor will have to pay 1% of the deposit amount as a penalty. In the one year but less than two years term deposits the bank has cut rates by 20 bps to 6.50% From October 1, 2019, all banks will have to link their home, auto, personal and SME loans to an external benchmark after Reserve Bank of India asked banks to do so.

This is the fifth consecutive cut in the marginal cost-based lending rate (MCLR) in this fiscal. The overnight lending rate of the bank is now at 7.80%, six-month deposit is at 8%, one-year at 8.15% two-year is at 8.25% and three-year deposits are priced at 8.35%.

Though it has reduced the lending rates the deposit rates have come down by double the amount and it has also hiked a number of service charges.

The bank has hiked some of its service charges like the locker charges, which have gone up steeply with charges being at Rs 1,500 plus GST for a locker in the metro area, which works out to Rs 1,700 and Rs 9,000 plus GST for an extra large locker in a metro region. A small locker of the bank is now at Rs 1,200. An extra large locker in a rural area will now cost Rs 7,000 plus GST. For these rates, the customer will be allowed 12 visits free, but after that he will be charged Rs 100 plus GST for every visit.

As on June 30, 2019, the bank has a deposit base of over Rs 28 lakh crore with current account savings account (CASA) ratio of 45.1% and advances of over Rs 19 lakh crore. SBI has a market share of 35% in home loans and 36% market share in auto loans.

Though the interest rates on SBI's repo linked home loans, which were the first products in the market, are the cheapest, it has steep processing fees, which is 0.35% of the loan amount with service tax, where the bank will charge a minimum of Rs 2,000 plus service tax and maximum of Rs 10,000 plus service tax. This is over and above the out of pocket expenses for valuation report and registration charges.