The Reserve Bank of India (RBI) does not expect a huge churn in savings deposit funds following the deregulation of interest rate on such deposits, as banks are not heavily competing with each other to garner savings deposits, Deputy Governor Subir Gokarn said Tuesday.
“We may not see much of a shift in funds, but overtime, we will see an improvement in quality of service and the range of options the depositors will have,” Gokarn said at a press meet after a public event.
However, smaller banks will likely find it more attractive to raise rates, as it will give them a new competitive edge, he said.
“They (smaller banks) can try and attract deposits from some larger banks. In turn, we expect that as larger banks start facing more competition, they also are innovating around their savings deposits products in terms of both financial attributes and non-financial service attributes to retain customers,” Gokarn said.
Earlier last month, the central bank freed savings deposit interest rates from its control and allowed banks to set rates as per their choice, which was fixed at 4% earlier.
Gokarn further said this was the most appropriate time to deregulate the interest rate on savings account as it could be least destabilzing in view of the healthy deposits available with the banks.
“We did it (savings rate deregulation) at a time when banks are not grappling for deposits. The deposits are quite healthy. The gap between deposit and credit growth is quite narrow now,” Gokarn added.
“We may not see much of a shift in funds, but overtime, we will see an improvement in quality of service and the range of options the depositors will have,” Gokarn said at a press meet after a public event.
However, smaller banks will likely find it more attractive to raise rates, as it will give them a new competitive edge, he said.
“They (smaller banks) can try and attract deposits from some larger banks. In turn, we expect that as larger banks start facing more competition, they also are innovating around their savings deposits products in terms of both financial attributes and non-financial service attributes to retain customers,” Gokarn said.
Earlier last month, the central bank freed savings deposit interest rates from its control and allowed banks to set rates as per their choice, which was fixed at 4% earlier.
Gokarn further said this was the most appropriate time to deregulate the interest rate on savings account as it could be least destabilzing in view of the healthy deposits available with the banks.
“We did it (savings rate deregulation) at a time when banks are not grappling for deposits. The deposits are quite healthy. The gap between deposit and credit growth is quite narrow now,” Gokarn added.
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