State Bank of India raises interest rates on fixed deposits

The largest public sector bank in India – State Bank of India (SBI) has announced increase in interest rates payable on fixed deposits. The change in interest rates on bank fixed deposits are revised from January 8, 2021.

For fixed deposits maturing in one year to less than two years of principal below Rs 2 crore the interest rates payable are revised up by 10 basis points to 5% from earlier 4.9%. For other tenures the interest rates have been kept constant.

SBI offers 50 basis points extra rate of interest for senior citizens. Pensioners and staff of SBI enjoy 100 basis points more rate of interest than that offered to general public. SBI has also announced the extension of ‘SBI We care’ deposit scheme for senior citizens wherein they were offered 50 basis points more rate of interest over and above the rate available for senior citizens for fixed deposits with tenure of five years and more.

After a series of cuts in interest rates following the actions of Reserve Bank of India (RBI) to fight covid19 pandemic, the public sector lender has taken a U turn by raising interest rates on bank fixed deposits.

RBI announced resumption of normal liquidity management operations in a phased manner starting January 15, 2021. SBI’s move is seen as a step to raise funds ahead of end of the financial year. Observers of the financial markets see it as a sign that perhaps the rate of interest in the economy has bottomed out for time being. Though the hike may not attract all those savers looking for ‘highest interest rate paying fixed deposit’, it surely offers a ray of hope for savers who have to settle for low reward for their savings.