RBI has removed prepayment penalty for home loans and deregulated savings interest rates. But bankers should not panic because of deregulation of savings rate. They should stop accepting term deposits for less than 6-month duration. This one step will reduce huge short-term deposit work and save cost to banks. Short-term deposit should be accepted from firms and companies who cannot open savings account. Moreover, shifting savings deposits from one bank to another is not easy as many payments and receipts of depositors are now through ECS and it is inconvenient to inform new savings account number to all the concerned frequently. But in spite of hiking repo rate to 8.5%, it will have no effect on inflation unless CRR is also suitably increased.
Sudhir K Bhave, Mumbai