Even as public sector banks (PSBs) are waiting for the Reserve Bank of India?s final guidelines on savings rate deregulation to finalise their new rates and features for savings accounts, some banks are planning to reduce rates for bulk deposits in a bid to compensate for higher rates for savings accounts.
M Narendra, chairman and managing director of Indian Overseas Bank said there are a host of proposals on which the bank is currently working on to make savings accounts more broad based, benefiting both the bank and the customers. ?We will wait for the RBI?s final norms to decide on the new structure for our savings accounts.
?Though the RBI had said the deregulation of savings account was with immediate effect, we are waiting for a final word from the regulator as we will be keen to unveil innovative deposit products along with the new rates for savings accounts,? said Narendra, adding the bank not only wants more savings bank customers but also wants to retain existing customers.
Narendra added the bank could launch short-term fixed deposits with a tenure of 20 days to 30 days. ?Let us see what are the RBI norms are for structuring these kind of products,? he said.
IOB is also planning to reduce its rates offered on bulk deposits so that it compensates the higher savings rates to some extent. On an average, the bank pays 9-11% for bulk deposits across various maturities and will reduce them by 200 bps. ?This will help us reduce high cost deposits and get more savings accounts,? added Narendra.
Central Bank of India executive director VR Iyer said the bank is planning to reduce rates for high cost deposits where almost half are bulk deposits.
?We will reduce the high cost deposits from R60,000 crore to R55,000 crore in the coming days. At present, we have almost R26,000 crore of bulk deposits,? said Iyer.
Central Bank has constituted a committee to prepare the new structure of the savings accounts. According to its calculation, with just 100 basis points higher rates for savings accounts, its interest costs will shoot up around R200 crore.
Canara Bank CMD S Raman said though the bank hadn?t raised its lending rates after the RBI raised its key rates (repo and reverse repo) by 50 basis points while announcing its last two credit and monetary policies, it would be raising its lending rates as it has to pay higher rates on savings accounts.