RBI governor sprang a surprise by deregularising savings interest rates while announcing the second quarter monetary policy review, even though it was a foregone conclusion that RBI will eventually have its say.
After Yes Bank announced six per cent interest for all savings bank accounts – which is not surprising considering that it has just about three to four per cent of the total deposits under its savings bank portfolio – depositors expect other banks to follow. But the fact remains that the move will not make any significant difference to a large majority of savings bank account holders with average balances of less than Rs 1 lakh. Assuming that a bank increases the rate by one per cent, the maximum one would earn is an additional Rs 1,000 a year, provided the average balance is at the top. No depositor would take the trouble of migrating to another bank to open a new savings account for this small difference. Besides, for thousands of customers whose captive salary accounts are decided by their employers and bankers, it may not be worth the while to have one more account. Therefore, one may expect four to five per cent interest for an average balance of Rs 1 lakh and below, and 4.5 per cent to six per cent for higher balances, depending on the level of savings accounts the bank holds and the liquidity position. For banks that are resorting to frequent borrowings from the repo window or call money, it may make sense to quote higher rates for high net worth individuals and reduce their interest burden to some extent.
S Ravindranath, Coimbatore
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