SBI Slashes Savings and FD Rates to Historic Lows!!

SBI Slashes Savings and FD Rates to Historic Lows: What It Means for You

On June 15, 2025, the State Bank of India (SBI), the nation's largest lender, implemented a significant reduction in interest rates, affecting both savings accounts and fixed deposits (FDs). This move aligns with the Reserve Bank of India's (RBI) recent monetary policy adjustments and reflects broader trends in the banking sector.

Key Changes Implemented by SBI:

• Savings Account Interest Rate: Reduced to 2.5%, marking the lowest rate ever recorded by the bank.

• Fixed Deposit Rates: Decreased by 25 basis points across all tenures for retail term deposits up to ₹3 crore.

These rate cuts apply to both new and renewing deposits, indicating a comprehensive approach to interest rate adjustments.

Context and Rationale:

The RBI's decision to cut the repo rate by 50 basis points earlier this month has led to a general decline in deposit yields across the banking sector. SBI's adjustments are a response to this broader monetary easing, aiming to align the bank's deposit rates. 

Additionally, with approximately 45% of SBI's ₹36 lakh crore loan book linked to the repo rate—including significant segments like home and auto loans—the bank is seeking to manage its net interest margins effectively. By reducing the interest rates on deposits, SBI anticipates mitigating the impact on its annual interest income, which is estimated to decrease by about ₹8,100 crore due to the repo rate cut. Specifically, lowering the savings deposit rate is projected to save the bank approximately ₹5,750 crore annually.

Implications for Depositors:

For customers, these changes mean lower returns on savings and fixed deposit accounts. This trend may prompt depositors to explore alternative investment options that offer higher yields, such as mutual funds, government bonds, or other financial instruments.

Broader Banking Sector Trends:

SBI is not alone in adjusting its interest rates. Other major banks, including HDFC Bank, ICICI Bank, Canara Bank, and YES Bank, have also reduced their fixed deposit rates in recent weeks. These collective actions suggest a sector-wide response to the RBI's monetary policy and an emphasis on maintaining financial stability and profitability amidst changing economic conditions.

Conclusion:

SBI's recent rate cuts reflect a strategic move to adapt to the RBI's monetary policy changes and the evolving economic landscape. While these adjustments aim to preserve the bank's financial health, they also signal a shift in the savings environment for customers, who may need to reassess their investment strategies in light of the lower interest rates.