A reduction in interest rates on savings bank accounts is not really something to feel happy about, but not for investors who hold shares in a bank that has announced a reduction.
Yes, State Bank of India shareholders became slightly richer on Monday as the stock rose sharply after the bank announced a cut in interest rate on savings bank accounts to 3.5% from 4% on balance of Rs 1 crore or less.
The State Bank of India stock, which did quite well this month and outperformed the benchmark indices by a good margin, gained
The banking sector heavyweight announced today that it is introducing 2 tier saving bank interest rate, effective 31 July 2017. As per the announcement, balance above Rs 1 crore will continue to earn interest rate at 4% per annum, while interest rate at 3.5% per annum shall be offered on balances of Rs 1 crore and below.
The bank said that the decline in the rate of inflation and high real interest rates warranted a revision in the rate of interest on saving bank deposits.
The revision in rates is expected to help the bank maintain the MCLR (marginal cost based lending rates) at existing rates, and result in benefits to a large segment of retail borrowers in Small and medium-sized enterprises (SME), agriculture and affordable housing segments.
Earlier, in Januay this year, State Bank of India had cut the MCLR by 90 basis points, on large inflows in saving and current accounts post demonetisation of high value Rs 500 and Rs 1000 banknotes by the government in November 2016. However, since then, there has been significant outflow of Current Account, Savings Account (CASA) deposits, the bank said.
The heavyweight State Bank of India, which is now much bigger after the merger of its associates State Bank of Patiala, State Bank of Hyderabad, State Bank of Travancore, State Bank of Bikaner & Jaipur and State Bank of Mysore with itself, reported a shap 123% jump in net profit at Rs 2814.82 crore for the quarter ended March 2017. Total income increased 7.8% in the fourth quarter.
State Bank of India shares touched its highest level in 2-1/2 years, rising to Rs 315.30 on 19 May 2017 post announcement of results, and today, the stock closed at Rs 312.80, with a gain of about 4.5%, after touching a high of Rs 313.90.
On BSE, the SBI counter clocked a volume of about 3.417 million shares today, four times the average daily volume of 8.54 lakh shares. On the National Stock Exchange, the counter recorded a volume of 41.54 million shares today. The stock topped the chart on NSE, clocking a turnover of Rs 1283.45 crore.
It was a good session for a few other PSU bank stocks as well. Bank of Baroda, Punjab National Bank, Bank of India, Andhra Bank and Canara Bank gained 1% – 3%.