On 25th October 2011, RBI announced deregulating of interest rate on saving account. It came as a pinch of salt on existing wound for the Banking industry. Immediately we hear Yes Bank with almost negligible retail customer base announcing rate hike to 6%, this was followed by Indusind Bank and Kotak Bank. We have not seen any large bank even giving hint of any change in rate as of now.
How many times in your life have you changed your bank account & what was the reason for the change? Change in city of residence, relocation within the city making accessibility to your bank difficult, bad service consistently. In how many bank do you operate saving accounts? Maximum 2-3.
There is a cost involved in changing of bank account – you have your demat / trading account linked with your saving account, your utility bills / credit card bills, ecs linked; so a change in saving account means lots of paperwork. For those looking for opening another saving account, it would mean more files and records.
Most large bank with high CASA ratio would postpone the idea of hiking interest rate on saving account, but I would not be surprised to see 6months down the line some of this large banks reducing rate on saving account for account with average balance let say Rs. 25000/- or Rs.50000/-. I see a rationalization of saving account interest moving up or down basis account type (higher minimum balance – higher rate). We already have banks offering saving account where balance above a said amount (let say Rs.10,000/-) would immediately earn FD return.
The next 6 months will bring a lot of changes in saving account offering, but its impact on the banks margin is questionable. We may also see no interest on saving account with zero balance, salary account. This will also impact the short term FD market.
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