SBI savings account: The State Bank of India (SBI) has also announced a revision in the interest rate on savings bank deposits. The interest rate on savings bank deposits effective September 1, 2019, with balances up to Rs 1 lakh is 3.5 per cent. Going forward, from November 1, 2019, the interest rate on savings bank deposits with balances up to Rs 1 lakh will be 3.25 per cent. This, according to SBI, is in view of the adequate liquidity in the system.
The interest rates on fixed deposits (FDs) have been reduced by the State Bank of India (SBI). The new rates of interest on SBI FDs will be applicable effective October 10, 2019. Importantly, After the recent repo rate cut by the RBI, the interest rate scenario in the country continues its downtrend. RBI has signaled more such rate cuts in future if conditions are in favour.
Interest rate on SBI savings bank deposits
Currently, the interest rate on savings bank deposits on balance up to Rs 1 lakh is 3.5 per cent. On balance above Rs 1 lakh, the interest rate is 3 per cent per annum, which is set at 2.75 per cent below RBI's Repo Rate, with a minimum of 3 per cent for the entire balance. With repo rate falling, this rate of interest will also get revised.
SBI FD interest rates
As far as FD rates are concerned, SBI is going for a reduction in the interest rate on 1 year to less than 2 years' tenor only. The rate of interest on other duration of FDs is remaining the same. The FD interest rate on 1 year to less than 2 year deposit is being reduced from 6.5 per cent to 6.4 per cent. The senior citizen will get 6.9 per cent on FD for this duration.
- On deposits between 180 days to 210 days and on deposits between 211 days to less than 1 year
the rate of interest has been reduced from 6 per cent to 5.8 per cent.
- On deposits between 1 year to less than 2 year, the interest rate will stand reduced from 6.5 per cent to 6.4 per cent.
- On deposits between 2 years to up to 10 years, the interest rate will stand at 6.25 per cent.
Impact of SBI FD rate cut
The impact will be felt more by investors who have their existing deposits coming up for renewals soon. Those who rely on bank fixed deposits for their regular income needs such as as retirees and senior citizens will be hurt the most. Although, bank fixed deposit have low after-tax returns and are hardly able to beat inflation over the long term, they act as a capital preservation tool for the retirees.
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Alternatives to bank FD
With banks lowering fixed deposit interest rates, they would sooner or later ( once FD matures) move their funds into other banks which may still offer them a higher yield, especially the Small Finance Banks. The other avenue left for them are post office small savings schemes such as Time Deposits, PO monthly income account and senior citizens savings scheme.