BANK account holders' cheer after the Reserve Bank of India hiked the rates on saving accounts could be short-lived, as the banks are likely to make them pay for a slew of services to offset the costs, bankers and analysts have said.
Earlier, the regulated interest rate of 3.5 per cent per annum -unchanged since 1993 --helped banks garner low-cost deposits and maintain good margins, due to which many services came free.
But, with last week's RBI action to hike the rate to 4 per cent and its articulated bias toward deregulation -which would push up the rates further -in a discussion paper posted for comments, there is a high likelihood of customers being asked to pay transaction charges, bankers said.
Among various actions which banks could take will be charges for non-maintenance of minimum balance, raising the minimum balance requirement, an increase in cheque issue charges and a limit on the number of free transactions, ratings agency Crisil said in a note. Fearing that competition for low-cost savings deposits will drive up the rates and affect margins, a majority of lenders have voiced reservations about deregulation till now.
The pressure on net interest margins is likely to further increase if the RBI deregulates savings account deposit rates, Crisil said.
Central Bank of India chairman and managing director S Sridhar said that deregulating the savings bank interest rate is premature as lenders need higher margins to make up for inefficiencies in the system.
Besides, they also have to allocate money toward mandatory requirements such as financial inclusion and opening branches in rural areas, among others, he said.
Levying of transaction charges is a trade-off drawing attention to banking operations in the developed world, where every service is charged.
The Reserve Bank of India (RBI) has said in a draft paper that the savings account interest rate should be deregulated. This rate is at present 3.5 per cent.
