The State Bank of India has said that deregulation of savings bank deposit rate may not be necessary, especially when the banks are offering options to swipe the savings bank deposits to fixed deposits.The savings bank deposits in banks in the country are already deregulated in a sense, with the swipe system allowing them to convert the deposits to fixed deposit to enjoy the higher rates, said Pratip Chaudhuri, chairman, SBI.
While the customers are availing higher interest rates even now on their savings bank deposit accounts with swipe facilities offered by banks, deregulation of the deposit rates may not be necessary, he added.
"We have responded to the RBI that deregulation may not be necessary. But we would go along with the decision of RBI," said Chaudhuri.
The interest rates for savings bank accounts at present are not attractive. Once it is made attractive, around Rs 9 lakh crore (Rs 9 trillion) of currency available in the economy could be mobilised, he said.
There are also chances that with the deregulation, some banks may offer higher rates for deposits in cities and metros while the rural area would not be able to enjoy the benefits.
The RBI, at the end of April 2011, released a discussion paper on deregulation of savings bank deposit rate, seeking feedback from banks by May 20.
It has pointed out that the deregulation of the savings bank deposit rate, which is at 3.5
per cent, would improve monetary policy transmission.
After presiding over a corporate social responsibility initiative of SBI by donating Rs 18.5 lakh (Rs 1.85 million) to The Leprosy Mission Trust India, he told reporters that with the inflation rate on the higher side, at eight per cent, an increase in interest rates could derail the country's economy.
SBI is in the process of absorbing State Bank of Indore, for which the merger process was started in 2010.
Chaudhuri said the merger of some of the other five associates could be expected at the earliest by next year, indicating that it was not an urgent matter.
It has merged State Bank of Saurashtra in 2008.
For its proposed rights issue of Rs 20,000 crore (Rs 200 billion), the bank is in talks with the government, since the target is upwards of Rs 10,000 crore (Rs 100 billion).
