Bank of India Slashes Savings Rate to 2.5%; Joins Sector-Wide Cut After RBI Repo Reduction

The ripple effect of the Reserve Bank of India's recent 100 basis point repo rate cut is now being strongly felt across the banking sector. Yesterday On July 7, Bank of India became the latest state-owned lender to cut its savings deposit rate by 25 basis points, bringing it down to 2.5% per annum for balances up to Rs. 1 lakh.

Bank of India Rate Cuts

Alongside its savings rate revision, BOI has also slashed its interest rate on green deposits, with the popular 999-day fixed deposit which will now give interest of 6.7%, down from 7%. These rate changes are effective from July 7th.

This is the second rate cut by BOI in recent weeks, following earlier fixed deposit revisions. As per the bank's website, one-year FDs under Rs. 3 crore now earn 5.75%, and senior citizens earn 6.25%.

Savings Rate Comparison

Several major banks have already lowered their savings account interest rates just like Bank of India did. here's the latest Interest rate for several bank.

Why Are Indian Banks Cutting Savings and Deposit Rates?

The rate cuts is mainly because of RBI's cumulative 100 basis points reduction in repo rate over the last five months. Since the borrowing cost is now lower, banks no longer need to offer higher deposit rates to maintain liquidity. As a result, both savings account and fixed deposit rates across the banking sector have been revised downward.

What will be the Impact on Depositors?

One of the major impacts for Depositors will be that they will now earn less interest on their balances. Many banks have moved to a flat interest rate model which will potentially affect high-balance accounts that previously earned more.
Since all major banks are moving in sync, depositors have fewer options to secure better returns on traditional savings instruments.

MCLR Rates Reduced Post RBI's Rate Cut

Bank of India along with other major Indian banks have recently reduced their Marginal Cost of Funds-based Lending Rates or MCLR, making loans more affordable for borrowers. Punjab National Bank (PNB), Indian Bank, and Bank of India have each cut their MCLR by 5 basis points across various tenures, effective July 2025. For example, PNB's one-year MCLR now stands at 8.90%, down from 8.95%, while both Indian Bank and Bank of India have reduced their one-year MCLR from 9.05% to 9.00%. Additionally, HDFC Bank has also reduced its MCLR by up to 30 basis points, effective July 7.