The report “Your savings account likely to earn more” (April 28) says deregulation of interest rates on savings accounts is the first step towards deregulation. This is incorrect. In fact, deregulation of interest rate on savings accounts is the last step in the deregulation of interest rate on deposits. With the Reserve Bank of India (RBI) having deregulated interest rates on fixed deposits, savings deposits remained regulated till now. All through, bankers have opposed regulation and it is quite surprising that bankers have opposed the RBI’s move to deregulate interest rates on savings accounts. The opposition to deregulation comes from certain public sector bankers because their way of doing total business (read deposits and advances) suffers from huge operational inefficiencies.
Although savings interest rate deregulation is big news, especially to small depositors, banks who are eager to free the interest rates on savings accounts are likely to form a cartel after some time and offer a unified rate on such deposits. Eventually, savings account holders would not benefit significantly.
Further, the move comes against the backdrop of inflation, so RBI’s response amounts to peanuts because deregulation would not jack up the savings rates to the extent of affording small depositors relief from inflation.
K V Rao, Bangalore
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