The RBI today decided to increase the savings deposit rate from 3.5% currently to 4%.
In the recent period, the spread (difference between interest rates)
between savings bank deposit rates and fixed deposit rates have
increased sharply. The hike in savings account rate was imperative
considering that real interest rates (adjusted for inflation) on savings
account balances have been in the negative for quite a while now.
This move will impact banks which have a high CASA (current account and savings account) base. The
likes of SBI, HDFC Bank etc that have benefited from a larger
proportion of low cost deposits will be seeing some margin pressure.
However, the same will only be temporary before the benefit of a larger
account base catches up. However, the RBI has not ruled out
deregulation of the savings rate, a move that may see banks trying to
cannibalize market share of their peers.