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The deregulation of interest rates on savings bank account will encourage banks to come out with innovative customised products, particularly for deposits over Rs one lakh.
The Reserve Bank of India, in its second quarter review of monetary policy on Tuesday, has advised banks to offer a uniform interest rate on savings bank deposits up to Rs one lakh irrespective of the amount in the account. For deposits over Rs one lakh, a bank can provide differential rates of interest, if it so chooses, the central bank said.
“Banks will try to introduce customised products in the form of higher interest rates, concessions on retail loans and flexi deposit schemes and lower transaction charges particularly for deposits over Rs one lakh,” said Mr S.L. Bansal, Executive Director, United Bank of India.
The transaction costs for savings bank deposits below Rs one lakh is likely to inch up. “There might be certain limitations on the number of annual transactions allowed per customer. There could also be a rise in cash handling charges, cheque return charges etc. However, we will have to wait and watch how it pans out for the industry,” Mr Bansal said.
The move will certainly drive competition among banks, he added.
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