Submit Articles A Collection of Informative and Interesting Articles  
 
HOME LOGIN SUBMIT ARTICLES TOP AUTHORS WANT AN ACCOUNT?
 

Savings Rate Deregulation: Will It Bring Any Benefit For Depositors?

BY: Vivek SHARMA | Category: Finance | Submitted: 2011-10-30 04:03:22
       No Photo
Article Summary: "The article analyses impact of Savings Deposit rate deregulation in India by RBI. RBI monetary policy review has become more of a , Cut, Copy and Paste' affair in recent times. Every time when RBI comes out with a reveiw, there is in an increase in repo and reverse repo rate by either 25 or 50 basis point by RBI. .."


Share with Facebook Share with Linkedin Share with Twitter Share with Pinterest Email this article




RBI monetary policy review has become more of a , Cut, Copy and Paste' affair in recent times. Every time when RBI comes out with a reveiw, there is in an increase in repo and reverse repo rate by either 25 or 50 basis point by RBI. The same thing happened in the 2nd quarter of monetary policy review of RBI which was released recently. The repo and reverse repo rate were increased by 25 basis point once again. However, there was something different this time. This time apart from increasing repo and reverse repo rates, RBI has done something which is being viewed as significant step in context of policy change.

RBI has deregulated interest rates on savings deposit in the 2nd quarter review of monetary policy. Now banks in India can offer interest rate of their choice on deposits above one lakh. However, for deposits below one lakh RBI has asked banks to offer same rate of interest Till now, savings account holders have been receiving 4 percent standard rate of interest which is likely to change now.

This is being viewed as major policy change announced by RBI in recent times. But the fact remains that this won't bring any significant change for bank customers in India.
First of all, there are very few customers who maintain deposits above one lakh in savings account. Even if there are savings deposits with amount above one lakh, it is temporary parking of money. If the deposit amount exceeds one lakh for considerable period of time, it makes sense to switch the amount over to fixed deposits.

Salary accounts do have deposits above one lakh as the salary is received in savings account, but the money from these accounts is withdrawn after first few days of credit. Banks do have an opportunity to cash in this segment of savings deposits, however barring ,'Yes Bank' no bank has changed savings account rate of interest as yet.

RBI has instructed banks to have uniform rates for deposits below one lakh. Banks will ensure that they maintain the same rate of interest on deposits below one lakh. Any move to change rate of interest here will have significant impact on cost of mobilization of CASA ( Current Account and Savings Account) deposits by the banks. Banks will not like to chases investors to increase deposits at the rate higher than current rate as it would hit their net interest margin and return on assets.

Will there be any major change in the bank's approach to deposit mobilization in the long run? Only time will tell. However, as of now banks are not keen to bring any major surprises.

About Author / Additional Info:

Comments on this article: (0 comments so far)

Comment Comment By Comment Date

Leave a Comment   |   Article Views: 3498


Additional Articles:
•   Live For Others

•   There is Hope!

•   Increase Productivity With Providers From Outsourcing Companies

•   House Interior Designs and Colors According to Feng Shui


Latest Articles in "Finance" category:
•   DEMYSTIFYING THE ONTOLOGY OF TAXATION RULINGS IN THE GAMBIA: PART III

•   DEMYSTIFYING THE ONTOLOGY OF TAXATION RULINGS IN THE GAMBIA

•   Why is Wheeler Insurance Renewal Important and Beneficial?

•   Turn Your Skills Into MONEY

•   I'm Giving You a Raise

•   Public Sector: A Pride to Say Or a Price to Pay....

•   Internet as a Source of Income



Important Disclaimer: All articles on this website are for general information only and is not a professional or experts advice. We do not own any responsibility for correctness or authenticity of the information presented in this article, or any loss or injury resulting from it. We do not endorse these articles, we are neither affiliated with the authors of these articles nor responsible for their content. Please see our disclaimer section for complete terms.
Page copy protected against web site content infringement by Copyscape
Copyright © 2010 saching.com - Do not copy articles from this website.
| Home | Disclaimer | Xhtml |