The State Bank of India (SBI) fixed deposits (FDs) are going to fetch even lower returns now. Effective May 27, 2020, the bank has cut the FD rates across all tenure by 40 basis points. The immediate impact will be on those depositors who have their FDs coming up for renewal in the near future. The 1-year SBI FD rate of interest now stands at 5.10 per cent as against 5.50 per cent earlier. The SBI FD yearly interest will now be lower than before.
The rate of interest applicable for deposits of ‘1 year to less than 2 years’ and ‘2 years to less than 3 years’ will now give 5.1 per cent return instead of 5.50 per cent earlier. Effectively, 1-2-3 year FD will provide 5.1 per cent return per annum on SBI FD schemes. Similarly, the rate of interest applicable for deposits of ‘3 years to less than 5 years’ and ‘5 years and up to 10 years’ is being reduced from 5.7 per cent to 5.3 per cent per annum. For senior citizens, the additional interest rate of 0.5 per cent will continue as before.
The new rates of interest will apply to fresh deposits and renewals of maturing deposits. The interest rates on “SBI Tax Savings Scheme 2006(SBITSS)” Retail Deposits and NRO deposits shall be aligned as per the new rates for domestic retail term deposits.
The only silver lining is for the senior citizens. A special “SBI Wecare” Deposit for Senior Citizens has been introduced by SBI wherein an additional premium of 30 bps over and above the existing 50 bps will be paid to Senior Citizen’s on their retail TD for ‘5 Years and above’ tenor only. ‘SBI Wecare” deposit scheme will be available for a limited period i.e. up to 30th September, 2020.
The recent cut in the repo rate by the RBI is expected to put more pressure on the interest rates. With the falling cost of funds for the banks, the fixed deposit interest rate is also expected to fall further.
At a time when the investment in debt funds are looking scary as far as defaults are concerned in some of the categories and the markets in its downturn phase, the bank fixed deposits become the first choice to keep their savings safe.
