SBI becomes first Indian bank to link interest rates to RBI’s repo rate

The State Bank of India (SBI) has become the first bank in the country to link its saving and loan interest rates to the Reserve Bank of India (RBI)’s repo rate. The move assumes significance as the effective interest rate from May 1 on savings deposit above Rs 1 lakh will come down to 3.25% from 3.5%. Though, the linking of short-term loans like overdraft and cash credit facility with limit of above Rs 1 lakh will now attract an interest rate close to 8.25%. Hence, the interest rates on large SBI savings account deposits and interest rate on some short-term loans will automatically change as and when RBI changes its repo rate. This will help in better transmission of RBI’s policy rates into the banking system.