Savings account going to be costlier

Interest rates on savings bank deposits will be deregulated soon, but the move may affect small depositors, as they will have to bear additional costs. “Following the deregulation of the savings bank rate, the universal savings bank product will also undergo changes,” K.R. Kamath, chairman and managing director of Punjab National Bank, said on the sidelines of a Ficci event @ Kolkata. According to Kamath, who is also the vice-chairman of the Indian Banks’ Association, “A number of free-of-cost facilities that now come with a savings bank account, including the minimum balance, will go away and this will hurt the small depositors most.” The RBI itself had suggested deregulating the savings bank rate and the change would be brought about soon. “It will happen. The question is should it happen now?” Kamath said. “Savings bank interest rate is the anchor rate on the basis of which banks formulate their other rate structures. If the savings bank rate is deregulated, banks will take some time to readjust,” Kamath said. Public sector banks are against the deregulation of the savings bank rate. However, the Reserve Bank of India has already taken a few steps towards complete deregulation. Interest on savings bank deposits is now calculated on the balance in the account at the end of each day and at a higher rate of 4 per cent. While depositors are now getting a higher interest on savings bank deposits, the scenario may change post-deregulation with banks planning to levy charges for various services. For example, the minimum balance to maintain a savings account may go up, the number of debit transactions may be limited and there can even be a charge for updating passbooks.