Following the cut, the highest return offered by the bank is at 8.5%, offered on all deposits maturing between one and 10 years. On lower term deposits, the bank offers 6.5%. The revision also simplifies the rate structure into two slabs from five sets earlier.
SBI chairman Pratip Chaudhuri said that in the first five months of the current fiscal (April-August 2012), the bank has seen its deposits grow by Rs 78,000 crore. However, loans have grown by Rs 20,000 crore during the period.
With demand of funds easing, SBI has been able to completely offload its bulk deposits. "We wanted to go slow in deposit mobilization; and if we did not reduce deposit rates, it could have put pressure on margins," said Chaudhuri.
The SBI chief said that he expected the Reserve Bank of India to bring down the cash reserve ratio (CRR) requirement for banks in the forthcoming monetary policy, which would release additional funds for banks.
SBI recently announced a series of cuts in rates on home and auto loans and also lending to small and medium enterprises to accelerate the growth of its retail portfolio to compensate for the slowdown in corporate credit. The bank offers the lowest rates in the market - between 10.25% and 10.4% - for home loans.
It also offers the cheapest car loans at 10.75%.
Bank data released by RBI last weekend showed that in July 2012, non-food credit growth slowed down to 16.5% as compared to 18.6% in June this year and 18.9% in July 2011. Growth across key segments of industries and services has eased, clearly reflecting signs of moderation, said a report by Emkay Securities.
SBI is the only lender whose deposits grow at a faster pace than credit.
Overall for the banking industry, credit growth continues to outstrip the growth in deposits. For the fortnight ended August 10, RBI data showed that bank deposits had grown 14.3% (year-on-year) while bank credit grew 16.6%. As a result, banks (other than SBI) continued to borrow from RBI an average of around Rs 1 lakh crore.
A slowing economy could, however, ease the demand for credit. On Monday, Morgan Stanley cut India's 2012 GDP growth forecast further to 5% from 5.7%. "On a fiscal year basis, we have cut F2013 GDP growth from 5.8% to 5.1% (a 10-year low). We believe that GDP growth for the next two quarters will be sub-5% as weak monsoons and slowdown in external demand hamper growth," it said in a report.
A few days back, Union Bank of India cut interest rates on vehicle loans to 10.95% (0-7 years) with immediate effect. Earlier, the rates were in two slabs - 12.5% and 13.5%.
Around the same time, Dena Bank also announced a reduction of 1-2% in rates on most of its personal loans.
The Central Bank of India also brought down interest rates on home, vehicle and other retail advances such as personal loans by 2% this week.
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