MUMBAI -- The State Bank of India Monday said it will decrease interest rates on some deposits by up to one percentage point from Tuesday, following a cut in the central bank's key policy rate.
The country's lenders began pruning interest rates on both deposits and loans after the Reserve Bank of India last week slashed its main lending rate by a more-than-expected 0.50 percentage point to 8.0%, in a shift toward focusing on economic growth.
The RBI has also, since January, reduced the percentage of deposits that banks have to park with it by 1.25 percentage points to 4.75%.
Several lenders, including ICICI Bank Ltd., have reduced both their deposit as well as the benchmark, or base, lending rates.
The State Bank of India, India's largest lender by assets, Monday said it will cut lending rates, but in "segments" instead of an across-the-board reduction.
"Rather than reducing the base rate, we are trying to drop the spreads [over the base rate] for many of our customers," Chairman Pratip Chaudhuri told the CNBC-TV18 television, adding that the bank's asset liability committee has decided not to cut the base rate.
The SBI's base rate is 10%, just a shade above the 9.75% at ICICI Bank.
The SBI has already reduced interest rates on vehicle loans and is considering cutting rates for almost everything except for home loans, Mr. Chaudhuri said.
He also gave a low probability of further cuts in deposit rates as it would make bank deposits less competitive in comparison to other government-sponsored small saving schemes and result in a "reverse flow" from banks.
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