SBI (State Bank of India), India’s largest bank has cut the interest rate offered on Savings bank Account form 4% to 3.5% for deposits below Rs 1 crore effective July 31, 2017. For account balance above Rs 1 crore the interest rate is still 4%.
SBI said the move was prompted by decline in the rate of inflation and high real interest rates. This is BIG move and was not totally unexpected as interest rates have been falling across board.
I guess most big banks would follow suit and cut their saving account interest rates. This is again bad news for savers but as we have stated earlier Keeping money ideal in Savings Account is one of the worst thing you DO with your money.
What Interest Banks Offer on Saving Account?
The highest Saving Account interest rate is being offered by The Ratnakar Bank which at 7.1% for balances above Rs 50 lakh followed by digibank by DBS at 7% for balance up to Rs 1 lakh.
Following 7 banks offer 6% interest on their savings bank account on different balances: Bandhan Bank, digibank by DBS, Indus Ind Bank, Kotak Mahindra Bank, Lakshmi Vilas Bank, The Ratnakar Bank and Yes Bank.
SBI now offers 3.5% for less than Rs 1 crore balance and all other banks are still offering 4% irrespective of the balance.
What should you do?
The financial implication is NOT big but the emotionally it may be. This is good opportunity for people who keep their money ideal in savings account to look for alternate investment opportunities like Debt Mutual Fund and Bonds.
Keep money in Savings Account only when you need money for very short term like within a week or month. Rest all money can be shifted to Liquid/Short Term Debt Mutual Funds.