Don’t miss the latest developments in business and finance.

Banks want complete say in savings accounts

Image
BS Reporter Mumbai
Last Updated : Jan 20 2013 | 2:09 AM IST

Banks should have the power to decide on their own structure, terms and conditions, and charges for opening and maintenance a savings account if the central bank decides to deregulate the savings deposit rate, top bank officials told the Reserve Bank of India (RBI) today.

Top officials from public and private sector banks met RBI Deputy Governors Anand Sinha and Shyamala Gopinath to discuss the broad issues in the sector and analyse the impact of the latest policy rate increase on inflation.

According to a banker, who attended the meeting, one of the points of discussion was deregulation of savings deposit rates, where lenders have asked RBI to allow them to decide on the maintenance and other charges for a savings account. Some of the banks have also sought RBI’s permission for offering differential rates on differential balances in a savings account.

“We favour complete deregulation and not partial deregulation,” the official said.

Earlier this month, RBI raised the savings deposit rate by 50 basis points. As a result, banks are now required to pay four per cent interest on savings deposits.

The central bank started the process of deregulating the savings deposit rate by releasing a discussion paper on this issue late April. The rate is currently the only administered one, which is decided by the banking regulator.

More From This Section

In the discussion paper, while RBI favoured deregulation as such a move would improve transmission of the monetary policy, it also expressed concerns over unhealthy competition and asset liability mismatches. However, the central bank seems to suggest that advantages outnumber worries and hence it was expected the savings deposit rate would be deregulated in a phased manner.

Savings deposits account for 22 per cent of total bank deposits.

Bankers said while an increase in savings deposit rate was unlikely to exert undue pressure on their margins, partial deregulation, however, might stress their profitability.

Also Read

First Published: May 27 2011 | 12:39 AM IST

Next Story