Savings rate deregulation may push up costs for account holders

Bank account holders’ cheers after the RBI hiked the rates on saving accounts could be short-lived, as the banks are likely to make them pay for a slew of services to offset the costs, bankers and analysts have said. Earlier, the regulated interest rate of 3.5 per cent per annum — unchanged since 1993 — helped banks garner low- cost deposits and maintain good margins, due to which many services came free.

But, with last week’s RBI action to hike the rate to 4 per cent and its articulated bias toward deregulation — which would push up the rates further — in a discussion paper posted for comments, there is a high likelihood of customers being asked to pay “transaction charges”, bankers said.

“The transaction charges will go up for the consumers if the rates on savings bank accounts keep on going up…

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2. RBI to look into deregulation of savings’ interest rate
3. RBI in favour of deregulation of interest rates on savings bank accounts
4. Deregulation of Savings Bank Deposit Interest Rate – A Discussion Paper
5. RBI to float discussion paper on deregulating savings a/c rate