State Bank of India (SBI), the country's largest lender, today ruled out any immediate hike in savings deposit rates, even as private sector lenders have raised interest within days of the Reserve Bank of India (RBI) deregulating such rates.
"We will not be amongst the first few. We will watch the other banks first. We do not have any immediate plans to hike the interest rates on savings bank accounts," SBI Chairman Pratip Chaudhuri said.
"Interest rate is not the only factor to open a bank account. A large number of people have multiple bank accounts... It all depends on quality of service and facility offered to them. The decision to hike interest rates on savings deposits has to be taken with great consideration and tabulation," he said.
A top bank executive preferring anonymity said, "The total deposits in SBI's savings accounts are to the tune of nearly Rs 3.5 lakh crore, and a hike of 1% in interest would mean that it would cost us Rs 3,500 crore, which will have to be passed on to the customers."
Earlier, a senior official of SBI had indicated that it might raise interest on savings deposit rate by up to 125 basis points, in view of the competition, after the RBI deregulated interest rate on savings accounts on October 25 giving banks the freedom to decide their own rates.
The interest rate on savings accounts was earlier fixed at 4% a year.
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Within days of RBI's announcement, Yes Bank, Kotak and IndusInd have raised interest rates on savings deposits to 6%.
The global ratings agency Moody's has recently stated that RBI's move to deregulate savings interest rates would reduce the profitability of banks.