The State Bank of India (SBI) on Wednesday has cut the interest rate on savings bank accounts to 3 per cent and also waived the minimum balance requirement.

The bank brought down the interest rate on saving accounts of up to Rs one lakh to 3 per cent. Earlier, these deposits used to fetch 3.25 per cent, while the interest rate on deposits above Rs one lakh stood at 3 per cent. The latest rationalisation will see a 3 per cent rate being offered on all buckets.

In a significant relief to account holders, SBI also decided to waive the maintenance of average monthly balance (AMB) for all savings bank accounts.

At present, SBI savings bank customers’ need to maintain a minimum balance of Rs 3,000 in metros, Rs 2,000 in semi-urban areas and Rs 1,000 in the rural areas. For the non-maintenance of minimum balance, the bank imposes a penalty of Rs 5 to Rs 15, plus taxes.

SBI’s move comes at a time the RBI has placed restrictions on the withdrawals in Yes Bank. Industry observers say SBI’s move to do away with minimum balance is well-timed as it expects some of the depositors of Yes Bank to move to other banks. Several private sector banks have a minimum balance requirement of Rs 10,000.

Keeping in mind the bank’s “Customers First” approach, SBI has also waived SMS charges.

SBI also reduced its fixed deposit rates and marginal cost of funds-based lending rates (MCLR) for various tenors.

MCLR has been brought down by 10-15 basis points across all tenors.

Consequently, one-year MCLR comes down to 7.75 per cent from 7.85 per cent with effect from March 10. This is the tenth consecutive cut in MCLR in the current fiscal. SBI added that EMIs on eligible home loan accounts (linked to MCLR) will get cheaper around Rs 7 per one lakh on a 30-year loan.

EMI on car loans will also be reduced by Rs 5 per one lakh on a seven-year loan.

The bank’s retail term deposit rates have been reduced by 10 basis points for one year and above and by 50 basis points for deposits up to 45 days. Moreover, the bulk term deposit rates have also been brought down by 15 basis points for deposits in the 180 day and above maturity bucket.