Interest on savings accounts would be computed on a daily basis from 1st April 2010. while the savings account holders are happy, the banks are not happy. This is because the banks’ margins are set to be impacted with the introduction of this new system.
Banks will also have to incorporate numerous changes, which also include new norms for pricing the loans, which is set to be introduced with the arrival of the base rate system from July. This is set to make car loans more expensive as base rate will replace the current BPLR method of lending.
The banks also have to get ready for adhering to the International Financial Reporting Standards, for which the guidelines have not yet been released by RBI.
The fiscal ending yesterday, saw banks cope with their net interest margin by sharp deposit rate cuts since the 3rd quarter of 2008-09.
Talking about the new system of computing interest, a top SBI official said, “Assessing the additional growth in amounts in saving accounts, the outgo will be more. This poses a huge challenge”.
Many public sector banks whose NIM lies between 2.7% to 3.62% are going to have a difficult time. This is because the government is expecting them to retain their NIM at about 3%. Rising expenses will stress their margins.
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