Although its fashionable to take a radical view on interest rates at such times, it would make more sense to say that with good assets a rarity now, deposit rates declining more slowly than those on advances, and bank spreads under a squeeze, most banks cannot get very reckless with liabilities. So, with minor exceptions-perhaps among some foreign banks and new private sector banks-there may not be a frenetic deposit rate war, especially since the 15-day fixed deposit is now there. The relaxation will be a welcome concession ratherthan any major galvanising factor.

For the RBI, this will take its job just halfway through. There's no reason why it should not go a step further and allow banks to pay interest on current account deposits, so that banks with a small branch network can garner more of these deposits. There is also a need to free the period of compounding from the existing quarterly basis to whatever suits each individual bank. Furthermore, the current practice of paying interest on SB accounts only on the lowest balance maintained from 10th to 30th of each month should be left to an individual bank's discretion. Having given banks broad ALM guidelines, the RBI will see that the more that is left to the discretion of banks, the sharper their ALM management skills get honed.