Banks benefiting from deregulation of interest rates
By Neelima Shankar
Jan 17, 2012
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The deregulation of the savings account interest rates by the Reserve Bank of India has been received well, particularly by the small private sector lenders. They have utilized this opportunity to attract customers by offering attractive interest rates.

Earlier, the interest rate that was offered on the savings account was directed by RBI. As a result of the development the banks can now themselves decide the interest rate that they want to offer.

Private lenders like Kotak Mahindra Bank, YES bank and IndusInd Bank have hiked already hiked the rates considerably. However, larger banks have been quite about the matter, reason being their huge customer base. Even a marginal hike in the rates will put a lot of burden on larger banks.

The Group Head, Consumer Banking at the Kotak Mahindra Bank, Mr. K.V.S. Manian said, "The hike in rates have had a positive impact, and though the real impact on the current and savings account (Casa) mix is yet to be seen, we have already seen a 10% increase in our average quarterly balance."

The President of Financial Management at YES Bank, Mr. Jaideep Iyer, said, "All the matrix have improved and, hence, we are expecting an increase in the ratio of savings account deposits."

Kotak Mahindra Bank now offers an interest rate of 5.5% on deposit below Rs. 1 lac. For deposits above Rs. 1 lac a customer earns 6% interest.


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