India’s largest bank, State Bank of India (SBI), has reduced interest rates on fixed deposits by 20 basis points across various tenors effective May 16, 2025. The revision affects retail domestic term deposits below Rs 3 crore for both general and senior citizen depositors. The highest revised rate now stands at 6.7% for tenors between two and three years, reflecting a broader monetary easing trend following the Reserve Bank of India’s (RBI) recent policy repo rate cuts. This move underscores the evolving landscape of deposit yields as lenders recalibrate to a softer interest rate environment amid global and domestic economic pressures.
SBI’s Strategic Rate Reduction on Fixed Deposits
In a notable adjustment to its fixed deposit (FD) offerings, the State Bank of India implemented a uniform reduction of 20 basis points in interest rates across various deposit tenures starting May 16, 2025. The adjustment applies to retail domestic term deposits under Rs 3 crore, encompassing both general customers and senior citizens, signaling a cautious stance by the lender in response to monetary policy shifts.
The revised interest structure now awards the highest yield of 6.7% for deposits maturing between two and three years, followed by 6.55% for tenors stretching from three to under five years. For longer-term deposits spanning five to ten years, the interest rate has been recalibrated to 6.30% for the general public. Depositors opting for durations between one and two years receive a rate of 6.5%.
Impact on Specialized Deposit Schemes
SBI’s specific tenure scheme, “Amrit Vrishti,” which offers a 444-day fixed deposit, also witnessed a rate adjustment, with the interest rate lowered from 7.05% to 6.85%. This revision aligns with the broader rate cuts and applies from May 16, 2025. Importantly, senior and super senior citizens—those aged 80 and above—continue to benefit from enhanced interest premiums, preserving the bank’s commitment to catering to these segments despite the overall downward adjustment.
RBI’s Monetary Policy Influence
The reduction in SBI’s FD rates follows the Reserve Bank of India’s consecutive 25 basis point cuts in the policy repo rate, implemented earlier in April 2025. The current policy rate stands at 6%, reflecting the RBI’s accommodative stance aimed at sustaining growth amid mounting uncertainties, including potential reciprocal tariffs imposed by the United States. These monetary easing measures influence banks’ lending and deposit rates, prompting institutions like SBI to adjust their offerings accordingly.
Market Response and Broader Implications
Following the announcement, SBI’s shares exhibited a modest uptick, trading at Rs 793.95 on the Bombay Stock Exchange, a 0.27% increase from the previous close. The rate cuts signal a recalibration in the banking sector’s deposit pricing, affecting savers who may seek alternative investment avenues amid declining fixed income yields.
The downward revision in FD interest rates indicates an environment of lower borrowing costs but also presents challenges for retail investors dependent on stable fixed returns. This dynamic underscores the need for depositors to reassess portfolio strategies in the context of shifting interest rate cycles.
Conclusion
SBI’s decision to reduce fixed deposit rates reflects the evolving macroeconomic landscape shaped by RBI’s monetary easing and global economic pressures. While the cuts align with efforts to stimulate credit growth and economic activity, they also necessitate careful consideration by retail investors seeking optimal returns in a subdued interest rate environment. The continued support for senior citizens within deposit schemes highlights the bank’s balanced approach to inclusivity amid these adjustments.
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