NEWS & ADVICE : FIXED DEPOSITS
RBI may deregulate savings a/c rates soon
By Neelima Shankar
Sep 9, 2010
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Savings bank accounts may not fetch fixed interest rates for long. The Reserve Bank of India is looking to deregulate the interest rates on these accounts soon. Savings bank rates are the only rates which are still regulated by the banking regulator.

The central bank is soon going to set up a working group for discussing the impact of deregulation, said RBI deputy governor Usha Thorat. "An important consideration is whether deregulation of savings rates would draw more population into the fold of formal banking system," she added.

"On one hand, the low cost savings accounts provide banks with low cost funds of an enduring nature which facilitate asset-liability mismatch and help lower lending rates. On the other hand, the costs not currently recovered in handling such accounts have to be considered as well," she said.

"Given the level of interest rates on bank deposits, common persons are lured by higher interest provided by alternate channels especially in the informal markets. Totally freeing rates could, in situations where there is virtual monopoly of banking, lead to lowering rates in some areas while leading to increase in other areas - it would need to be ensured that there is no discrimination between different customers of the same bank," she said.


 


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