Bangalore: State Bank of India (SBI), the country's largest lender, said it will cut interest rates on fixed deposits on non-resident external rupee (NRE) and non-resident ordinary (NRO) accounts by 0.50 percent effective from September 7.

For the term deposits of 1 year to less than 5 year period the interest rate will be revised downward to 8.50 percent from the existing 9 percent.

"State Bank of India has decided to revise the interest rates on NRE/NRO deposits for the tenors of 1 year to less than 5 years to 8.50 percent per annum from 9 percent with effect from Sep 7, 2012," SBI said in a statement.

SBI also announced reduction in interest rate on fixed deposits by 0.5 percent for most of the maturity periods, a move likely to be followed by other lenders.

However, for deposits between 241 days and one year, the downward revision is 1 per cent. The new rate would be 6.5 percent as against 7.5 percent.

Of the total 9 maturity periods for fixed deposits, 0.5 percent downward rate revision is for 6 categories. The new rates would be effective from September 7, SBI said in a statement.

With the revision, the interest rate on 7-90 days fixed deposit would come down to 6.50 percent, from 7 percent. Similarly, term deposit 91-179 days would be down by 0.5 percent, at 6.50 per cent and 180 days fixed deposits would also attract 6.50 percent interest rate.

Fixed deposit with maturity of 181-240 days would now provide interest rate of 6.50 percent, down from 7.25 percent. For one year to less than 2 year maturity period fixed deposits, the new rate will be to 8.5 percent as against 9 per cent, down by 0.5 percent.

At the same time, interest rate for fixed deposits with maturity period between 2-3 years and 3-5 years has been slashed by 0.5 per cent to 8.5 percent. However, the bank has left interest rate unchanged at 8.5 percent for term deposit of 5-10 years.

(With Agency Inputs)