Crisil has said the cost of deposits for banks will increase by 10-20 basis points as they start computing interest on savings account balances on an everyday basis. The effect will be maximum for banks which have a major portion of salary accounts with highly variable balances.
But this hike is not going to affect bank profitability sharply or cause any major alteration in the portion of low-cost deposits in the banks. RBI had directed banks to begin calculating monthly interest on savings accounts on everyday basis in lieu of the present method of associating interest to the least balance between 10th and final day of every month.
Crisil said, “It is estimated that for a salary account holder with a minimum savings balance between 1-2 times of the monthly salary, the increase in interest income will be between 10% and 25%. The higher interest outgo on savings accounts will increase the cost of deposits for banks”. It said further that the effect would be lowered by the low interest rate of 3.5% given on savings deposits. Crisil thinks that the total rise in the cost of deposits for banks will be from 10 bps to 20 bps.
However whether this method will affect loans like personal loans is yet to be determined.
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