Mumbai: Excess liquidity in the system and very little demand for lending from businesses has forced the country’s largest bank - State Bank of India (SBI) - to cut interest rates on Fixed Deposits (FDs). The new rates will come into effect from next week.

SBI has slashed interest rates on FDs for ‘upto 3 years’ tenor by 20 basis points. "In view of adequate liquidity in the system as well as with the bank, SBI prunes its interest rates on retail term deposits by 20 bps for ‘upto 3 years’ tenor, effective from 12 May," SBI said in a statement.

Currently, SBI FDs between 7 days to 45 days fetches 3.5 per cent interest rate. Term Deposits maturing between 46 days to 179 days gives 4.5 per cent. FDs which matures between 180 days to less than one year fetches 5 per cent rate of interest. FDs that mature between 1 year and up to 10 years yields interest at the rate of 5.7 per cent. SBI offers anadditional 50 basis point interest rate to senior citizens across all tenors.

In March, SBI had slashed the interest rate on FDs by 20-50 bps across tenors effective 28 March 2020. That was the second rate cut in March. Earlier the bank had cut interest rates on FDs on 10 March.

The bank has also announced a reduction in its Marginal Cost of funds-based Lending Rate (MCLR) by 15 basis points across all tenors. The one-year MCLR will come down to 7.25 per centper annum from 7.40 per cent per annum with effect from 10 May 2020.

To safeguard the interests of senior citizens, SBI has also introduced a new product ‘SBI Wecare Deposit’ for senior citizens in the retail term deposit segment. Under this new product, an additional 30 bps premium will be payable for senior citizen’s retail term deposits with “5 Years & above" tenor only. This scheme would be in effect upto 30 September 2020, SBI said.

Earlier, SBI had cut interest rate on all savings bank accounts effective 19 April. The interest rate on SBI saving accounts for deposits up to Rs 1 lakh, and deposits above Rs 1 lakh is 2.75per cent.