Momentum of increase in savings a/c interest rates to slow down in near future
By Neelima Shankar
Nov 8, 2012
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Banks may have registered a rapid growth in CASA deposits by providing higher interest rates on savings accounts but the momentum of hike in savings account rates may decline in the near future.

Even though Reserve Bank of India deregulated interest rates on savings accounts last fiscal, not many banks have raised their rates on savings deposits. Those who have increased their interest rates include few private sector banks, which have hiked the rates to 5.5 percent to 7 percent from 4 percent, which was mandatory earlier. These banks are - IndusInd Bank, YES Bank, Ratnakar Bank and Kotak Mahindra Bank. Large and popular private sector or public sector banks have still not taken any step in this direction, and many of them continue to provide 4 percent interest rate on their savings accounts.

In the second quarter of this fiscal, banks which have increased their rates on savings deposits have reported a growth in their CASA segment. For example, IndusInd Bank reported 70 percent growth in its savings deposits segment, at Rs. 5312 crore. Similarly, Kotak Mahindra bank's savings segment grew by 66 percent in the same quarter and it stood at Rs. 5926 crore. Another such bank is YES Bank whose savings deposits grew by a 351.3 percent, being recorded at Rs. 3700 crore.

 Many bankers feel that the effect of base rate may also result in increasing growth in this segment, but, they feel it could be a slow growth. On the matter, the president (consumer banking) of Kotak Mahindra Bank, Mr. K. V. S. Manian said, "We expect the growth momentum in savings bank deposits to continue. But the same percentage growth may not continue."

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