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Banks keep savings deposit rates unchanged in current cycle
April 10, 2023
In the current rate hike cycle which began in May 2022 and saw a 250-basis-point (bps) hike in the repo rate, banks have almost kept interest rates on savings deposits unchanged.
“The increase in term deposit rates in the current tightening cycle has exceeded that in lending rate. Savings deposit rates of banks which are a third of total deposits have, however, remained almost unchanged in the current tightening period,” according to the Reserve Bank of India’s (RBI) Monetary Policy Report (MPC) for April, released last week.
This has moderated the increase in lenders’ overall cost of funds and helped in improving their net interest margins (NIM), the report said. The net interest margins the difference between the interest earned by a bank and the interest it pays – of banks improved to 3.73 per cent as of December 2022 from 3.44 per cent as of December 2021.
In March 2023, while term deposits constituted 58.5 per cent of aggregate deposits of scheduled commercial banks (SCBs), current account and savings account deposits were 8.9 per cent and 32.6 per cent, respectively.
State Bank of India (SBI) kept its interest rate on savings bank accounts at 2.7 per cent from May 31, 2020. However, the lender raised the interest rate on savings accounts with balances of ₹10 crore and above by 30 bps to 3 per cent from 2.7 per cent, effective October 15, 2022.
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