#FinancialBytes: Here's what changes for SBI customers from 1 May
The state-owned State Bank of India (SBI) is the largest public sector bank in the country with more than 42 crore customers. The country's biggest lender is set to implement some changes and rules for its customers from 1 May some of which are going to benefit the customers. Here's what changes for the customers of the bank from next month.
SBI, first bank to link repo rate and interest rates
State Bank of India had earlier announced that it will be linking the short-term loans as well as savings account deposits to the repo rate, the rate at which the Reserve Bank of India lends money to commercial banks. SBI is the first bank in the country to implement the repo rate-interest rate linkage, which is expected to make loans cheaper for customers.
What exactly is repo rate?
Repo rate is the rate at which Reserve Bank of India lends funds to commercial banks. RBI uses the repo rate as a tool to control the supply of money in the economy. Repo rate is also used to control inflation where the Reserve Bank increases it to lower inflation. When RBI lowers the rate, commercial banks generally pass the benefit on to customers.
SBI to reduce home loan interest rates from 1 May
Commercial banks typically finalize loan interest rates based on the MCLR (Marginal Cost of fund base Lending Rate). However, mostly, whenever the repo rate is cut, banks do not "directly" pass on the changes to customers; repo rate cuts usually make loans cheaper. SBI will reduce its interest rates by 0.1% on a home loan of up to Rs. 30 lakh from 1 May.
Savings accounts deposits above Rs. 1L to earn low interest
From 1 May, according to State Bank's new rules, savings bank account holders are, however, going to earn lesser interests on their deposits above Rs. 1 lakh. SBI customers with savings account deposits above Rs. 1 lakh will earn interest lesser by 0.25-0.75% from next month. For deposits up to Rs. 1 lakh, however, customers will earn an interest of 3.5%.
95% customers will have stability of interest rate: SBI Chairman
State Bank of India Chairman Rajnish Kumar earlier said, "Our 95% customers will have stability of the interest rate. The impact will be only for individuals with deposits over Rs. 1 lakh and above. The impact on number of credit customers will be more." "No retail accounts will be impacted. Only wholesale or corporate account will see a change," he added.