In the Reserve Bank of India's monetary policy review, banks will seek nod from the central bank to pay interest on current account deposits.
Presently, banks do not pay any interest on current accounts. By paying interests, bankers believe that this step could help cash to flow into the system which otherwise stays with the establishments. Current accounts are 9.85 per cent of the total deposits with banks.
Reserve Bank of India will announce its third quarter review of the monetary policy on January 29th.
In the review, bankers would give their views on credit growth and the fall in the deposit growth. They would also press RBI to cut Cash Reserve Ratio (CRR) and repo rate. RBI did not cut any rates after April, 2012 due to high inflation. Mr. Pratip Chaudhuri, Chairman of State Bank of India had demanded further rate cuts a few days earlier.
Even if the RBI decides to cut the repo rate, banks will have to cut its interest rates on deposits to maintain the protect margin and bring down the cost. Hough this might not be easy as the deposit growth remained sluggish. The deposit growth has just been 11 per cent, though RBI projected a 15 per cent growth during this financial year.