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How To Take Benefit Of Deregulation On Saving Bank Deposit Interest Rate?

Since March 2010, every monetary policy review has raised the basis point. With every upward move of basis point, banks have passed the complete burden on consumers which resulted in high interest loan rates.

The same episode happened in the last monetary review meeting held on 25th October 2011. Constantly for the 13 time, RBI have raised the basis point. With this raise of 25 bp, now the repo rate have reached to 8.50%. But this time monetary policy has come with one more big news for the finance industry which is impacting both financial institutions and consumers these days i.e Deregulation of saving bank deposit interest rate.

saving interest rate deragulation

Lets first have a small introduction with the term ‘Deregulation of saving bank deposit interest rate’. RBI the central bank of India have a set of guidelines that is mandatory to be followed by all the banks in India. As per RBI guidelines, the saving bank interest rate was fixed for the banks i.e 4%. But with the deregulation, now banks will be allowed to decide the rate of interest they like to offer to their customer on the saving account.

Benefits Of Deregulation Of Saving Bank Interest Rates

  • It will raise the level of competition between banks which will benefit customers with high interest rate on their balance in saving account.

Post Effects Of Deregulation On Saving Bank Interest Rates In India

  • Banks are now allowed to fix interest rates for their saving bank account customers.
  • Banks are offering attractive rate of interest for depositors having balance of Rs one lakh and more.
  • Interest rate have gone up a little ranging from 1% to 3% after deregulation.
  • Banks are offering high interest rates on short term or ultra short term deposits (less than 6 months deposits).
  • Individuals are not getting any substantial benefit with the rising interest rate offered by banks as compare to big companies.
  • Banks may come up with a new variety of saving bank accounts with different interest rates soon to attract more customers.
  • Customers are switching banks to get high rate of interest on their savings.
  • Customers are keeping all their savings in one saving account to make it go above Rs 1 lakh to get the benefit of rising interest rates.
  • Banks offering high interest rate on saving account may increase the loan rates to pass the burden to the customers.
  • Banks can impose some kind of restrictions on operating saving bank account like restricted number of withdrawals, higher minimum balance etc. against high interest rates.

Consumers with surplus idle cash in their saving bank account may get some benefit with the rising interest rates for some time. The best way to ensure to get the benefit is to maintain your cash in two saving accounts where keep some cash in one saving account with full facilities and the surplus in other saving account with higher interest rates.

After this news every bank is coming with their own statement. Few banks want to wait for while before making any such big decision as this can either impact the profitability of the banks or can put additional burden on the borrowers.

But some banks have come up with their revised interest rates on saving bank account. Lets have a look at the list of banks offering highest interest rate on saving bank account in the Indian market.

Bank Name

Increase In BPS

Upto Rs 1 Lakh

Increase In BPS

For Rs 1 Lakh And Above

Yes Bank ↑ 200 bps 6.0% ↑ 200 bps 6.0%
IndusInd Bank ↑ 150 bps 5.5% ↑ 200 bps 6.0%
Kotak Mahindra Bank ↑ 150 bps 5.5% ↑ 200 bps 6.0%

Saraswat Bank has also announced 6% interest on savings deposits w.e.f 1 Dec 2011, which will be payable every quarter and thus effectively paying 6.14 % interest on an annual basis.

Customers of government bank may not be able to get the benefit of rising interest rates as government banks are not in mood to increase interest rates on their saving bank account for new or existing customers.

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