Savings deposit rates at historic low in some PSBs: RBI Bulletin

THEBUSINESSBYTES BUREAU

MUMBAI, JULY 27, 2025

Savings deposit rates of several public sector banks (PSBs) have hit historic lows since their deregulation in 2011, according to the Reserve Bank of India’s (RBI) July bulletin. The central bank noted a broad-based moderation in deposit and lending rates across the banking sector in response to recent monetary policy easing.

The RBI highlighted that the weighted average domestic term deposit rates for fresh deposits have declined notably for both PSBs and private sector banks. “Currently, the savings deposit rates of some PSBs are prevailing at a historical low, since their de-regulation in 2011,” the bulletin said.

The deregulation of savings bank deposit rates in October 2011 allowed banks the freedom to set interest rates independently. However, the latest data indicates that some public lenders are offering among the lowest savings deposit rates since that policy shift.

The article also observed that while the central government kept small savings scheme rates unchanged for the September 2025 quarter, these rates remain 33 to 118 basis points (bps) higher than those determined by the existing formula.

On the lending front, the RBI stated that the 100-bps reduction in the policy repo rate since February 2025 has led banks to reduce their external benchmark-linked lending rates by a full 100 bps and marginal cost-based lending rates by 10 bps. As a result, weighted average lending rates on fresh and outstanding rupee loans of commercial banks declined by 26 bps and 18 bps, respectively, between February and May 2025.

The decline in weighted average lending rates during this easing cycle has been more pronounced in PSBs compared to private sector banks. On the deposit side, the weighted average term deposit rates on fresh and outstanding deposits fell by 51 bps and 2 bps, respectively.

The current rate dynamics suggest a cautious approach by banks amid a softening interest rate environment, reflecting both policy transmission and competitive realignments in deposit mobilization.