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State Bank of India (SBI) on Friday indicated that it could increase interest rate on savings bank accounts by up to 1.25 per cent in view of competition following freeing of such rates by RBI.
“On an average...we are expecting 100-125 basis points increase in the funding cost of savings bank,” said Mr Pratip Chaudhuri, Chairman, SBI. Earlier this week, the Reserve Bank had deregulated the savings bank deposit interest rate with immediate effect giving banks freedom to determine their own rates.
Immediately after the announcement, private sector Yes Bank, a relatively small player, had raised savings rate by 200 basis points to 6 per cent.
Banks now offers 4 per cent on savings bank accounts.
He, however, said, “We would not be the first mover,” adding that SBI will not be too worried as it has 34 per cent of its total deposits in saving bank accounts on account of is wide distribution network. “We will have to see how other banks play it out and then we will take appropriate policy action,” he added.
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