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  1. Another demonetisation blow to honest taxpayer: Your bank deposits to earn less?

Another demonetisation blow to honest taxpayer: Your bank deposits to earn less?

Banks in India are reportedly considering reducing interest rate on savings account for the first time in the history, as those are flush with low-cost deposits after demonetisation.

By: | Updated: February 8, 2017 4:05 PM
If the decision is finalised, depositors would make less money for keeping their money with banks in savings accounts. (Image: Reuters) If the decision is finalised, depositors would make less money for keeping their money with banks in savings accounts. (Image: Reuters)

Banks in India are considering reducing interest rate on savings account for the first time in the history, as those are flush with low-cost deposits after demonetisation, CNBC TV18 reported citing two of the largest public sector lenders.

This means that if the decision is finalised, depositors would make less money for keeping their money with banks in savings accounts.

Savings accounts in India, used mostly by small depositors, earn 4%-6% interest rates, which have remained at those levels for very long. However, banks are now flush with low-cost funds from the deposits made after the government banned high-value currency notes in order to curb the menace of black money.

“Banks have made huge cuts in MCLR (marginal cost of funds-based lending rate) without cutting deposit rates,” Usha Ananthasubramanian, MD and CEO of India’s second-largest state-run lender Punjab National Bank said in an interview to CNBC TV18. “The month-wise cuts (in lending rates) that have happened are more than what RBI would have passed on during this period,” she added.

MCLR serves as a benchmark for setting various lending rates, including home loan interest rates. Banks across India have cut benchmark lending rates owing to a surge in liquidity in the system due to sudden deposits.

RBI replaced previously existing base rate with MCLR in April last year, as it felt there was a need for better transmission of RBI’s policy rate actions in bank’s lending rates as well.

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“Banks have transmitted the cost of fund reduction at this time… further avenue of reduction on interest rates is less likely,” P S Jayakumar, MD and CEO of India’s third largest state-run lender Bank of Baroda told CNBC TV18 referring to probability of further cut in interest rates on loans.

Earlier last month, the country’s largest bank State Bank of India cut it MCLR sharply by 0.9 percentage points. Its one-year MCLR is now at 8%.

Other private sector banks including ICICI Bank, HDFC Bank, Kotak Mahindra Bank, Axis Bank and others, followed SBI and cut their rates too. State-run banks including Bank of India, Union Bank and Punjab National Bank also cut their lending rates.

 

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  1. V
    VSS
    Feb 8, 2017 at 8:55 am
    Why no one talks about the margins between the cost of fund and lending rates? Are thelse not coming down with automation netbanking?
    Reply
    1. S
      Shashiendra Rajeev
      Feb 8, 2017 at 6:51 am
      The headline does not befit a financial newspaper . Interest rates in India are extremely high because of poor management of the monetary policy due to issues of corruption. Fiscal deficits have steadily increased since the 1970's, investments in central sector projects have yielded very poor results with the result of continuous wastage of the country,s savings despite there being a regular increase in the quantum of money(M) supply leading to high inflation .Honest taxpayers will also pay lesser EMIs and lower prices in Retail in case inflation is curbed to the desired level which facilitates growth.
      Reply
      1. g
        ghosh.amritlal@gmail
        Feb 8, 2017 at 5:54 am
        Savings Bank interest rate cut will not be a good move.
        Reply
        1. j
          j.s.banthia
          Feb 8, 2017 at 6:13 am
          where this money was parked prior to demonetisation and what was the yield same place it can again be parked. i believe they were mostly in almirah or hidden by housewife for emergency needs now since it is disclosed they can make f.d.
          Reply
          1. V
            VENKATESH
            Feb 8, 2017 at 6:00 am
            Finance Ministry has become insane. He brings law every day. High time, he is removed,
            Reply
            1. M
              M
              Feb 9, 2017 at 3:48 pm
              Anju Purohit - did you even understand what you said ?... I swear it was it was very difficult to understand... you should have asked someone else to write it if you don't know English ....
              Reply
              1. Mesquiteice
                Feb 8, 2017 at 9:59 am
                Very bad reporting. The author does not even realise that the honest tax payer does not have bank balance. They only have outstanding loans. From vehicle, to homes to even cell phones on emi. Loan is more than bank balance
                Reply
                1. ramya gupta
                  Feb 8, 2017 at 6:16 am
                  Earnings growth this quarter might remain soft, but investors are in the mood to invest and there is palpable optimism around India Equity tips
                  Reply
                  1. S
                    Saroj K
                    Feb 9, 2017 at 8:16 am
                    News channels are always praising NaMo
                    Reply
                    1. X
                      xyz
                      Feb 8, 2017 at 10:21 am
                      I am loving this day by day. The Indian middle cl deserve this. They voted en lot for Modi for aache din. And they are getting aache din. Oil price crashed from 150$ to 30$, yet our sweet middle cl is paying 70 rs. Railway fares tatkal schemes are now in dynamic state. I love this, The other day I paid 1400 for a talkal ticket of 600rs. Of course this pain, the middle cl will agree, is sweet pain. Now this lower interest will be followed by less FD interest. But thats sweet pain for the middle cl.
                      Reply
                      1. S
                        sukumar
                        Feb 8, 2017 at 5:44 am
                        The heading is political,is it a financial paper?, no wonder they do not sell but printed and kept in house.
                        Reply
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