The impact of the Reserve Bank of India’s (RBI) recent 0.25% reduction in the repo rate is now becoming visible. State Bank of India (SBI) has cut interest rates on fixed deposits (FDs). SBI has reduced the interest rates on its special fixed deposit scheme, ‘Amrit Vriddhi’, by 0.15%.

Now, under SBI’s ‘Amrit Vriddhi’ scheme, FDs for 444 days will earn an annual interest rate of 6.45%. Senior citizens will receive an annual interest rate of 6.95%. In addition, the bank has reduced interest rates on FDs with a tenure of 2 years to less than 3 years by 0.05%. The interest rate on these FDs will now be 6.40% instead of 6.45%. The new interest rates will be effective from December 15th.

Investment opportunity in SBI’s ‘WeCare’ scheme

SBI has not made any changes to the interest rates of its other special term deposit (FD) scheme, ‘WeCare’. Under this SBI scheme, senior citizens will receive an additional 50 basis points of interest on deposits (FDs) for a tenure of 5 years or more. Senior citizens already receive 0.50% more interest than the general public on retail term deposits of less than 5 years.

Therefore, under the ‘WeCare Deposit’ scheme, FDs for 5 years or more will earn 1% more interest compared to regular citizens. Accordingly, senior citizens are currently receiving 7.05% interest on FDs for 5 years or more.

What happens when the RBI reduces the repo rate?

Banks start getting money from the RBI at a cheaper rate. Earlier, they had to pay 5.5%, now they are paying 5.25%.

Since banks are now getting money at a lower cost, they want to reduce the amount of money they borrow from the public by offering lower interest rates on FDs.