The Reserve Bank of India (RBI) has slashed its repo rate by 50 basis points, marking the end of the high interest rate regime in the country. This move has led to a cascade effect, with several banks, including public and private sector lenders, cutting their lending rates and adjusting their fixed deposit rates. As a result, interest rates on savings accounts have also been reduced.
Public sector banks, such as State Bank of India, Punjab National Bank, and Bank of Baroda, are currently offering interest rates ranging from 2.7% to 2.9% on savings accounts. Private sector banks, on the other hand, are offering slightly better rates, ranging from 2.75% to 3.25%.
The RBI’s focus is now on accelerating economic growth, and if retail inflation remains stable, it may cut rates further in the future. This could have a direct impact on fixed deposits and savings accounts, with banks potentially paying lower interest rates.
Adhil Shetty, CEO of BankBazaar, suggests that depositors should consider investing in other instruments, such as fixed deposits, mutual funds, or government savings schemes, to earn higher returns. In the current environment, earning interest from a savings account alone may not be sufficient.
The trend of lower interest rates is expected to continue, as the RBI prioritizes growth support and inflation remains within its comfort zone. For depositors, this may mean lower returns on traditional deposits, but it could also lead to cheaper borrowing and encourage consumption and investment.