Categories: Business

Covid-19: Customers are shying away from taking risks and taking loans, deposit interest rate reduced due to reduced loan demand

Photo: GOOGLE

There is risk aversion at borrowers' end, banks cuts savings deposit rates

new Delhi. State Bank of India (SBI) chairman Rajnish Kumar has said that banks are ready to lend, but customers are not coming forward to take loans. Banks are cutting interest rates on deposits as demand for new loans comes down amidst a tight liquidity situation.

Kumar said that today customers are shying away from taking risks and taking loans. He said that the bank is hopeful of a loan guarantee scheme of Rs. 3 lakh crore for the Micro, Small and Medium Enterprises (MSME) sector. Through this scheme, the government has indirectly infused Rs 30,000 crore in public sector banks.

Addressing the annual meeting of the Confederation of Indian Industry (CII), Kumar said on the criticisms of the bank keeping deposits with the Reserve Bank, "We have funds, but there is no demand for loans." He said that in such a situation, banks have no option but to keep their money with the Reserve Bank. As far as customers are concerned, they do not want to take risks right now.

Interest rate reduction on savings account

State Bank of India has reduced the annual interest rate on savings bank accounts by 0.05 percent to 2.70 percent. At the same time, ICICI Bank, the second largest private sector bank, has cut the interest rate on savings account by 0.25 percent. As per information available on SBI website, the revised interest rates have come into effect from May 31. SBI has cut interest rates on savings account for the second time in the current financial year. Earlier in April, the bank reduced the interest rate on savings bank accounts by 0.25 percent to 2.75 percent in all slabs.

ICICI Bank has reduced the interest rate by 0.25 percent to 3.25 to 3 percent on all deposits below Rs 50 lakh. The interest rate on deposits of Rs 50 lakh or more has been reduced from 3.75 to 3.50 percent. The bank has said that the new interest rates on savings account will be applicable from Thursday.

This post was published on June 3, 2020 10:49 am

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