Private sector lender Axis Bank has reduced interest rate on savings bank accounts by 50 basis points to 3.5 per cent for deposits up to Rs 50 lakh.
However, the bank will continue to pay four per cent interest on deposits of above Rs 50 lakh. The new interest rates will be effective from August 8, Axis Bank said in its filing with the BSE.
Axis Bank’s action follows the decision by State Bank of India (SBI) and Bank of Baroda to reduce rates on savings deposits. SBI was the first bank to cut the savings deposit rate by 50 basis points to 3.5 per cent for deposits up to Rs 1 crore. Bank of Baroda had cut the rate to 3.5 per cent on deposits of up to Rs 50 lakh.
While Kotak Mahindra Bank retained the existing rates of five per cent on savings deposits up to Rs 1 lakh and 6 per cent on deposits between Rs 1 lakh and Rs 1 crore, it reduced the rate on savings deposits of amounts above Rs 1 crore and up to Rs 5 crore from six per cent to 5.5 per cent. The interest rate on deposits of over Rs 5 crores was retained at 5.5 per cent. Karnataka Bank, too, had tweaked the interest rate on savings deposits.
SBI Managing Director Rajnish Kumar had said that it was a choice between increasing MCLR (marginal cost of funds-based lending rate) or reduce the savings bank rates.
A hike in lending rates would have meant an increase in equated monthly instalments (EMIs) for retail, small and medium enterprises, and farm loans. SBI opted to cut savings rate, helping to maintain MCLR at the existing level, he said.