Deregulation of savings deposit rates to benefit customers
By Neelima Shankar
Jun 29, 2010
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Senior bank officials say that the proposed deregulation of savings bank rates may turn out to be beneficial for customers. They however said that the margins of banks might come under pressure due to this act.

It is expected that the interest rates on such deposits would be higher than the prevailing rates following deregulation.

Bankers say that the announcement in this regard may come somewhere around the time when monetary policy review of the Government comes on July 27.

“The interest rate might be close to about four per cent. However, the RBI indicated that any decision on this is unlikely before the monetary policy review in July,” said Mr S. L. Bansal, Executive Director, United Bank of India.

“As and when this happens, banks will have to offer competitive rates of interest on SB deposits. The customer will benefit from this as the interest rate will definitely be higher than what is being currently offered; may be in the range of 4-4.5 per cent,” said Mr K. R. Kamath, Chairman and Managing Director, Punjab National Bank.

“We will have to calculate it on the basis of call money market and repo rates. Banks might mobilise deposits at higher rates when the liquidity is scarce; however, if liquidity is ample, the rates might not be too attractive,” said Mr T. M. Bhasin, Chairman and Managing Director, Indian Bank.

“There has been a 47-basis point increase in the cost of SB deposits while our overall cost of deposits has gone up by 11 basis points. However, we have seen a good accrual in SB accounts; people are preferring to maintain their funds in SB accounts instead of shorter tenure term deposits as the liquidity in SB accounts is higher,” Mr Bhasin said.

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