Why is SBI cutting deposit rate across various deposits in the last few weeks? Should I shift my deposits to other banks?

You are right that the State Bank of India (SBI) has cut interest rates on recurring deposits (RDs) in select buckets effective from 10th October. SBI RD has terms ranging from 1 year to 10 years. SBI RD interest rates vary between 5.80%-6.25% for general public. At this point, SBI has only cut the deposit rates for short term deposits and not for long term deposits but that may follow soon. Check out the latest deposit rates for RDs at SBI after the rate cut.

· 1 year 5.80%

· 1 year to less than 2 years 6.40%

· 2 years to less than 3 years 6.25%

· 3 years to less than 5 years 6.25%

· 5 years and up to 10 years 6.25%

SBI has also cut interest rate on savings accounts with balance up to ₹1 lakh to 3.25%, from 3.5%. This will be effective from 1st November 2019.

These deposit cuts have been necessitated by the banks shifting to external benchmarking of loans from this month. That means the loan rates will now be linked to repo rate or Treasury bill yield. That means with every lending rate cut, your deposit rates will also go down. There will not much point in shifting banks as all banks will more or less follow the same rule.