The common 4 percent interest rate offered by all public sector banks on their savings account deposits has raised concerns of a possible ‘fixing' in the segment. This matter has been taken up by Competition Commission of India, which is responsible for ensuring fair play in the country by all industries. It is reported that the issue came into light after it was noticed that despite deregulation of the savings accounts interest rates by Reserve Bank of India in October 2011, almost all public sector banks continued to offer a common interest rate in the segment.
On the matter, a CCI official said that it seems that the public sector banks could be acting in tandem and that it was a matter of investigation. As a result of this policy being adopted by the PSBs, both the small depositors as well as the banks are losing out. He further added that private sector banks like Kotak Mahindra Bank and Yes Bank, which are paying as high as 7 percent on their savings account deposits, are witnessing huge inflows of funds. RBI data also shows that about 5 private banks, 10 foreign banks and 1 co-operative bank have hiked their savings account interest rates by anywhere between 1 to 5 percent.
It should be noted that savings account and current accounts (CASA) deposits form a regular and cheap source of funds for banks. For this reason, banks generally aim to have at least 30 percent of their total deposits as CASA deposits.