Private sector lender HDFC Bank and government-run Punjab National Bank (PNB) on Thursday reduced the interest rates on savings bank accounts by 50 basis points to 3.5 per cent on deposits up to Rs 50 lakh. However, the banks will continue to pay 4 per cent interest on deposits of above Rs 50 lakh.
“Post revision, customers maintaining savings bank account balance of Rs 50 lakh and above will continue to earn interest at 4 per cent per annum. Customers maintaining account balance of below Rs 50 lakh will earn interest at 3.5 per cent per annum,” HDFC Bank said in a regulatory filing. The revised rates will be applicable to both resident and non-resident customers.
The new interest rates of both the banks will be effective from August 19. Besides, PNB has also reduced interest rates on fixed deposits of less than Rs 1 crore by 15-40 basis points on select maturities.
SBI had cut interest rate on savings account deposits by 50 basis points to 3.5 per cent on balance of Rs 1 crore and below on July 31. Axis Bank had also reduced interest rate on savings bank accounts by 50 basis points to 3.5 per cent for deposits up to Rs 50 lakh. Another PSU lender Bank of Baroda had cut the rate to 3.5 per cent on deposits of up to Rs 50 lakh. Karnataka Bank too has tweaked the interest rate on savings bank accounts.
The 4 per cent interest rate on savings bank accounts has remained static since 2011 even as the overall interest rate and the retail inflation came down. The rationale for the rate cut is that the real interest rates are really high and “there was no choice for the bank but to bring down the savings bank account interest rate. “We have been cutting the term deposit rates and were watching for a right time to cut rates,” said an official of a nationalised bank.
According to SBI, the choice before the bank was to either raise the marginal cost of lending rates (MCLR) or cut savings bank interest rates. “We did not consider it appropriate to raise the MCLR, because for lot of segments like agriculture, SMEs, retail housing, affordable housing, the cost and EMI would have gone up,” SBI MD Rajnish Kumar had said.