SBI cuts rates by 0.25% across the board

The country's largest bank, State Bank of India, has taken deposit rates to a new low. It cut rates across the board by 0.25%. The latest rate cut is SBI’s second time this month and the sixth time this year. CNBC-TV18’s Gopika Gopakumar finds out what impact this would have on the market and how rates may pan out hereafter. For the last one year, SBI had shied away away from taking the lead in cutting deposit rates. Now, it looks like the country’s largest bank is feeling the pinch. The bank has revised its rate to at least 0.25% lower than most other banks. SBI may be cutting rates because it getting more deposits than it is dispensing loans. Data from the Reserve Bank of India shows that deposits this year have grown by 20% as opposed to credit, which has grown at 13%. In order to maintain the margin, SBI would have been forced to push down deposit rates. Since SBI has reduced its rates, this could result in other banks also being forced to cut their rates. Sources in SBI say the lower interest rate regime could continue till March 2010. They also said that the lending rates could also be reduced going ahead but not at least for the time being.