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What does this mean ?
This means that those accounts with a balance of Rs 1 crore or less will earn 3.5% per annum from July 31 while those accounts with a balance of above Rs 1 crore will continue to earn 4% per annum.
Main Reasons behind this cut in Interest Rate
- The level of inflation in the economy has fallen, allowing depositors to earn higher real interest rates on deposits.
- Demonetisation has led to a flood of deposits into the banking system. Nearly 60 percent of the deposits that came into the system have proved to be sticky, as RBI Deputy Governor SS Mundra told BloombergQuint in an interview earlier this month.
Note : The bank's decision comes two days ahead of the monetary policy meet of the Reserve Bank of India (RBI) where most analysts expect India's central bank to cut key interest rates.
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