CEOs of large commercial banks have urged the Reserve Bank of India (RBI) not to deregulate interest rate on savings bank account. At a meeting between the chief executives of select banks and RBI Governor D Subbarao on Tuesday, most bankers vehemently opposed the move to deregulate savings account rates which is fixed at 3. 5%, sources said. The meeting was a prelude to the central banks annual monetary policy to be announced on May 3. The Reserve Bank of India has set up a committee to study the consequences of freeing up of savings rate. All interest rates except the rates on savings account are free now.
Bankers told the governor that deregulation of savings rate could impact the stability of deposits. These are uncertain times. There is uncertainty about inflation, interest rates and growth. Therefore, in such times, we have suggested that, perhaps, this may not be the right time to consider a deregulation in rates, said a banker present in the meeting. Recently, former RBI governor YV Reddy also opposed deregulation of savings bank account rate.
Many of the common people dont have time to apply their mind and shift money from savings to deposits, etc. So, for heavens sake, give one banking instrument, one bank account where the man knows that this is the interest rate, this is the facility. This is required. I would even say, particularly, it is required for women in India whose money should be safe from their husbands, Mr Reddy had said in a recent media interview.
While expressing his reservation on deregulating savings rate, the recently retired chairman of the State Bank of India, Om Prakash Bhatt, said: A bank may pay 1% or less for those account holders who have small deposits and 5% if they are willing to keep.Rs.50, 000 in savings account. This in turn will impact small depositors.