State Bank of India (SBI) on Wednesday slashed interest rates on term deposits by 50-100 basis points across maturities.

The new SBI interest rate on deposits of up 15 lakh for fix deposits from 241 days to 1 year is now 6.5 per cent, 1 per cent down from 7.5 per cent paid previously.

Deposits for 181 days to 240 days will now get 6.5 per cent interest rate, 0.75 per cent down from 7.25 per cent paid earlier. For fixed deposits, ranging from 15 lakh to 1 crore, interest rate will now be 7.5 per cent, as compared with 8 per cent offered previously.

As per the new interest rates, the highest return offered by the state-run bank is 8.5 per cent, which will be offered on all fixed deposits maturing within the range of 1 year to 10 years.

SBI Chairman Pratip Chaudhuri said cuts in deposit rates were necessary to maintain the bank’s profitability.

Explaing the reason behind the move, Mr. Chaudhuri said, "We want to go slow on deposit mobilization. If we didn't reduce deposit rates, it could have put pressure on margins."

Mr. Chaudhuri also expressed hope that the Reserve Bank of India (RBI) would cut the cash reserve ratio requirement for banks its upcoming monetary policy, which would leave banks with additional funds to give loans.

Morgan Stanley said that SBI’s move to cut interest rates manifested the sluggishness in the economy.

The new rates will take effect from Friday, September 7.