Savings account interest rates to stay at 4%, says Puri
MDT/PTI 16 July 2012

The HDFC Bank MD and CEO said only a couple of banks have increased their pricing because they were not getting traction on the savings deposits front

 

Mumbai: Terming the impact of Reserve Bank of India (RBI)'s decision to deregulate savings accounts rates last year as 'insignificant' for HDFC Bank, Aditya Puri, its managing director and chief executive has said depositors should be content with 4% interest offered by larger lenders, reports PTI.

"The deregulation of the savings account has not had a substantial impact on our growth," Puri told shareholders at the AGM over the weekend.

"The savings account is a transaction account and there is a cost attached to it. So, 4% rate is fair and that's why you see most of the larger banks have not changed it," he said.

Puri further said only a couple of banks have increased their pricing because they were not getting traction on the savings deposits front.

Following RBI's move last October to lift the interest rate cap of 4% on savings account, a few lenders like YES Bank, Kotak Mahindra Bank and Saraswat Bank increased their offerings up to seven%, giving rise to expectations that there will be a flight of deposits to these lenders.

However, bigger banks, including State Bank of India, ICICI Bank and HDFC Bank, which enjoy a very high%age of the cheaper current and savings account (CASA) deposits, maintained a status quo keeping the savings rates unchanged.

HDFC Bank's CASA share in the total base fell to 46% as of 30th June, versus 49.1% a year ago on a lower growth in current account deposits.

However, there was a growth of 18.4% on savings deposits to Rs76,674 crore, according to Q1 numbers.

Puri said economic feasibility requires a balance of at least Rs7,000 in every savings account as a host of services are to be offered free of charge to the account-holder.

He recommended the fixed deposit route to all the depositors who want a larger interest rate on their deposits.

Comments
T D Sharma
1 decade ago
This will only act as a positive disincetive to saving and encourage consumerism. The dishonest motive is too eloquent.
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