Historical Lows for Public Sector Bank Savings Deposit Rates

Savings deposit rates offered by public sector banks (PSBs) have reached historically low levels, a scenario unfolding since their deregulation in 2011, the latest Reserve Bank of India (RBI) bulletin reveals.

Significant downtrends are observed in the weighted average domestic term deposit rates for fresh deposits across both public and private sector banks.

The article further explains that post the 2011 deregulation allowing banks flexibility in interest rate setting, the government opted to maintain rates for small savings schemes during this September quarter, resulting in rates higher than formula-based calculations by 33-118 basis points (bps).

In response to an overall policy repo rate cut of 100 bps from February 2025, banks have adjusted their external benchmark-linked lending rates downward and marginal cost rates by 10 bps, leading to an overall decline in weighted average lending rates for fresh and existing loans by 26 bps for commercial banks.

Meanwhile, the weighted average domestic term deposit rates for new and existing deposits moderated slightly, reflecting wider trends within the banking sector during this easing cycle.

(With inputs from agencies.)