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This week we focus on a complete analysis of the
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SBI targets the high end with Savings Plus 

BELLA JAISINGHANI  
In a bid to keep up with the Indian banking industry that is becoming increasingly competitive, the State Bank of India (SBI) has spruced up its delivery system. It has opened 67 Personal Banking Branches (PBBs) all over India, computerised 2,000 of its 9,000 branches in the country, and promises a new, improved service culture to its customers.

Dr A S Pathak, assistant general manager, Business Planning (Personal & Institutional), points out that SBI has worked out several strategies for its "high-value customers". Among its recent moves is the institution of the Savings Plus scheme at its PBB branches.

"Savings Plus is a concept that is the need of the hour. It has already been taken up by HDFC Bank, ICICI Bank and Citibank, who call it the Autosweep option. We have customers who keep large sums of money in their savings bank account and earn only 4.5 per cent interest on it. They say that it is a paltry rate of interest, considering they haven't touched that money for a year or two. So we thought of giving them the opportunity to convert part of their savings bank account into term deposits, thereby earning a higher rate of interest," says Dr Pathak.

The scheme ensures the automatic roll-over of term deposits, and allows for convenient withdrawals from term deposits through cheques. There is no loss of interest on the balance.

For this, the customer is required to open a Savings Plus account, which may either be a new account or an existing savings bank account redesignated. The only condition is that a minimum balance of Rs 10,000 be maintained. Should the balance fall below that amount on any day in a month, a service charge of Rs 50 will be levied for the month.

The customer chooses a threshold amount beyond which SBI will create the term deposits. This threshold amount would necessarily have to exceed Rs 10,000. All term deposits will be created under SBI MODS (Multi-Option Deposit Scheme). This would be in units of Rs 1,000, permitting unitised break-ups, so that the customer can maximise his interest income. Should he need funds in excess of the balance in his Savings Plus account, he can draw on his SBI MOD deposits conveniently by merely issuing a cheque on his Savings Plus account.

Of course, he can choose a specific SBI MOD deposit to draw from. However, in the absence of specific instructions, SBI will follow the principle of `last in first out'. This means it will break the latest SBI MOD deposit by an amount (in multiples of Rs 1,000) that is adequate for the payment of the cheque. The cheque need not be in multiples of Rs 1,000.

The deposit units, once withdrawn, are withdrawn irrevocably. Dr Pathak clarifies that the rest of the term deposit will continue to earn the contracted rate of interest.

Term deposits will be automatically opened for a minimum amount of Rs 10,000, in multiples of Rs 1,000, in any one instance. Of course, this depends on the availability of funds over the chosen pre-fixed threshold limit.

Dr Pathak elaborates, "The term deposits will be opened for maturities of six, 12, 24 and 36 months. The customer can opt for any one. In case he does not specify which, SBI will decide on a six-month maturity period. Again, unless the customer indicates otherwise, the term deposits will be rolled over for a similar period when they mature, at the rate of interest prevalent at the material time. So the funds are never idle."

The interest or maturity proceeds of term deposits will only be credited to the linked Savings Plus account. The customer will be mailed an advice every time a term deposit is created through the Autosweep provision, giving complete details of his deposit. The ordinary savings bank passbook will be issued for the Savings Plus account. Dr Pathak also says the Autosweep facility will be operative twice a month, based on the balance in one's Savings Plus account at the commencement of business on the 10th and 20th of every month.

Apparently the customer is free to change both the threshold balance as well as the maturity period of the term deposits at any time. A nominal charge of Rs 25 applies in such instances. But this charge is waived when the threshold balance is Rs 25,000 or more.

An overdraft limit or a demand loan facility is not available against the SBI MODS TDRs/STDRs created under the Autosweep facility. The interest on balances in Savings Plus accounts will be the same as that on savings bank accounts and will be calculated and applied in the same manner.

Interest paid on term deposits created through the Autosweep facility will be as per published interest rates for TDRs and STDRs for the various maturities. Interest on premature withdrawals on the SBI MOD deposits will be subject to the bank's rules for premature withdrawals of term deposits.

Copyright © 2000 Indian Express Newspapers (Bombay) Ltd.

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