The development implies that whenever the Reserve Bank of India (RBI) announces a change in the repo rate, it will automatically reset SBI's interest rates, media report stated.
Accordingly, savings account with deposit balances above Rs1 lakh will attract the effective interest rate of 2.75% below repo rate, which is currently at 6.25%. With this, effective interest rate in savings account works out to be 3.5%, which is unchanged at present.
Moreover, all cash credit accounts and overdrafts above Rs1 lakh would be priced at 2.25% over the repo rate. So, at current repo rate of 6.25%, this comes to floor rate of 8.5% for the bank. On this floor rate, the bank will charge a risk premium based on the risk profile of the borrower.