MUMBAI: HDFC Bank and Yes Bank are the latest to reduce their savings bank account rate following the lead of the country’s largest lender, State Bank of India (SBI). This takes the total number of banks to have reduced their savings account rate to seven.
Yes Bank has announced the sharpest cut on its savings deposits, bringing down the return on accounts with balances of up to Rs 1 lakh to 5% from 6% earlier. The bank has maintained the 6% return that it offered customers with deposits between Rs 1 lakh and Rs 1 crore, while reducing the rate on deposits above Rs 1 crore to 6.25% from 6.5% earlier.
HDFC Bank said that those who have balances of up to Rs 50 lakh will receive 3.5% as against 4% earlier. Those with balances of over Rs 50 lakh will continue to receive 4%. The revised rates will be applicable to both resident and non-resident customers. SBI was the first to reduce interest rates on savings account by announcing a two-tier scheme. The bank had reduced the return on deposits up to Rs 1 crore to 3.5% from 4% earlier. It continues to offer 4% on deposits of over Rs 1 crore. The bank said that it was necessary to cut the return on savings account in order to keep its cost of lending low.
Until now, seven banks — including SBI — have reduced their return on savings accounts. The other four banks are Bank of Baroda, Axis Bank, Indian Bank and Karnataka Bank. According to RBI officials, depositors continue to receive a positive return on their savings account considering that retail inflation is less than 3.5%. For most of the time, since interest rates on savings account were deregulated in 2011, real interest rates on savings account were negative as inflation ruled much higher than the 4% return offered on these accounts.
According to SBI chairman Arundhati Bhattacharya, customers can continue to get a better return on their savings account by opting for a facility where accumulated funds in a savings account get automatically transferred to a fixed deposit. These funds can be withdrawn any time, like a regular savings account.