This refers to the report “Your savings account likely to earn more” (April 28). Saving bank deposits account for roughly a quarter of total deposits of scheduled commercial banks and this is one reason banks are able to keep the cost of procuring funds low. Banks have obviously gained and their concern that the deregulation of the savings bank (SB) deposit interest rate would trigger competition and jack up the interest rates and push up the interest expenses are understandable.
However, customers are increasingly feeling that they are not getting a fair deal for the money they put in banks. Taking into account the prevailing level of inflation, the real interest rate are negative for customers.
Deregulation has become a mantra for greater efficiency, transparency and profits since financial sector reforms were set in motion in the early nineties.
The revision in the interest rate on SB is long overdue. It is clear that the Reserve Bank of India is keen on a balanced approach to the issue and is consistently building up a case for deregulation of SB interest rate.
Although the deregulation of SB interest would add to costs, banks can use technology to create a superior platform and come up with innovative products that could reduce transaction costs. That way they would be able to offer customers more interest without considerably affecting their margins.
Srinivasan Umashankar, Nagpur
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