The RBI says that the competition in this space, which was non-existent earlier, could rise as banks with lower CASA ratio could rush to gain such deposits by raising rates
The Reserve Bank of India (RBI), in its Financial Stability Report (FSR) for December 2011, warns that competition among the banks to offer higher interest rate on saving accounts could put pressure on banks’ margins.
According to the apex bank “The impact of such rate hikes on banks’ profitability will need to be monitored carefully as already the banks’ cost of funds have gone up and such rate hikes will put additional strains on banks’ net interest margin.”
It further added that the effect, however, may be muted, based on the churn in customers and cost structures adopted by individual banks. A corollary to the event would be that in a falling interest rate scenario, saving bank deposits rate may also moderate accordingly.”
The RBI says that the competition in this space, which was non-existent earlier, could rise as banks with lower CASA (current account savings account) ratio could rush to gain such deposits by raising rates.
According to the FSR, a major attraction of saving deposits for banks is that it offers low-cost source of funds, as evident from the fact that banks with higher share of CASA deposits (current account- saving account), of which saving deposits is a major part, enjoy low-cost deposits. CASA deposits are not uniform among the banks.
RBI feels that, “Banks are likely to partially offset the impact of the increase in interest cost by levying transaction and servicing charges and thus pass on the additional cost to the customer.”
The apex on 25 October 2011 deregulated interest rates for savings accounts in banks. Subsequently few banks raised interest rates to 6% on savings accounts compared to the earlier 4%. For instance, private sector player YES Bank raised it up to 6% and recently raised it to 7% per annum on deposits of Rs1 lakh and above.
Kotak Mahindra Bank followed with 6% rate per annum on all savings accounts with balance above Rs1 lakh and IndusInd Bank is offering 5.5% per annum where the balance is below Rs1 lakh and 6% per annum for accounts having more Rs1 lakh.
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I'm perplexed that with Ms.Sucheta & Mr. Debashish around how you always get things wrong?
Write to me if i'm wrong!
What is the reverse repo rate? What is the overnight call money rate? Why RBI removes cap on 'mobile banking transactions'?
Why RBI has allowed banks to borrow additional from MSF? Why only on overnight basis? Further RBI has also stated that can borrow [-]1% SLR on overnight basis! It will not be construed as default in SLR!
Where is the liquidity? Advance Tax/Service tax has sucked it up!
About $160Bn India borrowings from EU is facing an uncertain future! De- leveraging!
By June 2012, $137Bn [43.5% of total present forex reserves!] external debt up for maturity.!?
What about NPA's? Bad debts!
SBI has done a wise thing of postponing its $5Bn FCB! WHY IT REQUIRED?
By Dec 17, banks had borrowed record 1.66L Cr. WHY?!!
It's 2.91% of aggregate instead of MSF 1%!
Is there credit growth? In fact lesser by 65K Cr. & deposit growth higher by 150K.Cr! WHY?!
Why RBI's US Treasury Holdings dropped by $6.6Bn?
Why RBI has infused thro" OMO 24K.Cr? [buy back of excess securities.]
So by raising int. rates the banks are retail borrowers, depositors park long term apart from 6%&7% paying banks depositors which is not for common man!
MDT, i've would have appreciated had you substantiated by real figures!
HENCE, MDT DO NOT PROPAGATE FLAWED THEORY! OK!
RATHER AMEND YOUR VIEWS TO STATE THAT ---- YES- RETAIL DEPOSITS WILL STRENGTHEN THE BANKS DEPOSIT BASE TO SEEK LOW COST CASH FLOW @4%-5%. [6&7 are differentials.]
It was a bad piece of article, never ever expected from MoneyLife!
OH! You have to attribute it it to RBI Fin Report! What are your analysis!
PLEASE FORWARD TO ME RBI REPORT! It has never stated on retail margins! I'm reproducing hereunder the pertaining para for YOUR INFO!
Quote " Pointing out that bank margins could come under pressure, the RBI said servicing of loans have come under stress due to rise in input prices, interest rates, and slackening demand and infrastructure constraints"...... Unquote.
Sadly, Ms.Sucheta & MDT not highlighting that FSR has stated that the banking industry can cope with credit risk shocks!Neither on 'stress test'.
So Ms.Sucheta & MDT have it from me - not SB A/c int. but debts can create untoward position with current a/c & fiscal deficits!
Regards,
N.B. never fake reports to put in your thoughts.
Anyway, before calling a genuine report as fake because you think you are more wise and know everything is not good either. So stop barking. Here is the link to the original report http://rbidocs.rbi.org.in/rdocs/Publicat...
And keep your thoughts withing your eyes and ears only.
I would have appreciated your professional response. It would have reflected you in high esteem.
Regards,
Where is the article?
FCKeditor is pase its CKEditor! OK!
What do you know about 'MoneyLife'?
What is some 'sample text'? What is the rating of CKEditor?
Well beyond comprehension.
Regards,