Less than a week after the Reserve Bank of India announced the deregulation of the savings rate, the banking industry is seeing rapid changes in strategy.
So much so that they are now paying less to individual fixed deposit (FD) holders, mostly high net worth individuals, for certain tenures in the 15-90 day spectrum.
However, things could change once the big boys join the race. R K Bansal, executive director, IDBI Bank, said, "Though not immediately, in the future, the short-term rates could be benchmarked higher. But it would depend on liquidity conditions and the bank's requirements."
The difference in rates would not have a significant impact on companies, because they operate through current accounts, which do not pay any interest.
The need of the hour, Casa, is governing many a bank's moves. For instance, YES Bank, which kicked off the savings rate war by increasing its rate by 200 bps to six per cent, is offering four-five per cent for deposits less than Rs 15 lakh, for 15-45 days.
Rates for senior citizens are one per cent higher. Rana Kapoor, chairman, YES Bank, said, "We expect there would be a shift of individuals moving from short-term fixed deposits to savings bank accounts, since the rates are better. This is better for banks, in terms of administration, and also for consumers, since a higher rate would be paid on a day-to-day basis."
Similarly, IndusInd Bank offers 3.5 to six per cent for deposits below Rs 15
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