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Monday, November 7, 2011

Big banks in no rush to hike savings deposit rates, watching market trend

Bigger banks, both government-owned and private banks, are not in a big hurry to hike interest offered on savings bank accounts post deregulation of rates by the Reserve Bank of India (RBI).
“We are watching the market. We are not in a hurry to take any decision,” said KR Kamath, CMD, Punjab National Bank.
Banks have chosen to wait and watch how this change affects the banking sector and if customers shift base to banks offering higher interest.
“For the time being, we are not hiking interest rates on savings accounts. We don’t think our customers will shift base to banks offering higher interest. Customers look not just at interest rates but services offered,” a senior official of State Bank of India (SBI) said.
Public sector banks have opposed deregulation because their current account savings account (Casa) accounts for about 30 per cent of total deposits. Increase in interest on savings account will impact profitability of banks. Private banks with higher savings account ratio have also not yet announced any increase in savings account rates.
On October 25, RBI deregulated savings accounts rates, which were earlier fixed at 4 per cent. After deregulation, banks are allowed to decide on the interest it wants to offer to savings bank customers. However, RBI said that banks can differentiate between interest rates on deposits under Rs 1,00,000 and deposits above Rs 1,00,000.
Savings account interest rate was the last of the regulated rates.
So far, three banks, Yes Bank, Kotak Mahindra Bank and IndusInd Bank, have hiked interest on savings accounts to up to 6 per cent. These three banks have increased interest for savings accounts to 5.5 per cent for deposits less than Rs 1,00,000 and 6 per cent for on deposits above Rs 1,00,000.
Smaller banks, such as IDBI Bank, are expected to raise savings account interest rates soon.

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