In the recent press report, RBI announced a deregulation of the savings bank (SB) interest rate which will help the SB account holders to enjoy high earnings. This change in the policy is expected to bring out a great transformation in the banking operations. Before the deregulation, banks were supposed to give four percent per annum on savings accounts. This deregulation permits the banks to fix their own desired interest rate on SB account.
It allows the customers to switch to any bank at anytime. To retain the customers, the banks have decided to oblige high on transaction cost and service charges. YES bank has raised the interest rate to 6% which is upholding only 3% CASA account. RBI said that Banks have to maintain uniform interest rate on saving deposit upto Rs.1 lakh irrespective of the amount in the account within this limit.
The banks with low CASA ratios like Kotak Mahindra Bank, IndusInd Bank and IDBI Bank have decided to hike their savings rate in order to promote the credible candidates in the near term. This deregulation helps to raise the funds in the banks and achieve high profitability by investing the funds in different investment opportunities.