Banks that raised savings rate see hike in deposits

However, they have not managed to dent the business of those who have not increased rates

Several banks, such as Kotak Mahindra, Yes Bank, IndusInd and Ratnakar have raised the interest rates on savings deposits after teh RBI deregulated these rates in its poilcy announcement in October 2011.

Kotak Mahindra, which hiked its rates from four per cent to six per cent about 10 months ago, has recently claimed that the move has seen a hike of 68 per cent in its savings bank deposits and a 40 per cent rise in its customer base.

Other banks that increased their rates include Yes Bank, Indusind Bank and Ratnakar Bank, have also seen a rise in savings deposits.

Yes Bank’s savings bank deposits risen more than 354 per cent during the quarter ended June 2012 on a year-on-year basis, while Indusind has reported a rise of more than 59 per cent during the same period.

"We have seen our new to bank client deposit mobilisation run rate double over last year one year, driven both by increase in no of customers acquired and higher balances per client.", says Sumant Kathpalia, Head Consumer Banking, IndusInd Bank.

However, this does not mean that banks that did not increase their rates have taken a hit in their retail business. IDBI Bank’s retail banking head, RK Bansal, says that his bank has not been affected others who uppped their rates.

“It must be that they have added some new customers which has led to their customer bases increasing. And one must keep in mind that their customer base is small, which means a slight increase will show higher percentage increase”, says Bansal.
 
An State Bank of India official said that his bank’s savings deposits have been increasing on a year-on-year basis. According to the bank’s financial results, its savings bank deposits have risen 13.36 per cent during the quarter ended June 2012 over the corresponding year-ago period.

Vaibhav Agarwal, Vice President (research), Angel Broking says that even if customers have shifted to the banks that are offering higher interest rates, the impact on the banks that have not increased rates is negligible. “Since the banks that have not increased rates are big banks, a small dip will not be felt on their books”, says Agarwal.

He adds that most people would not shift to a different bank just because the interest rate on the savings account is high. “You can earn much higher interest on instruments such as fixed deposits,” he says.