India Legal News: RBI Says Banks to Fix Individual Interest Rates

Indian legal news brings you the latest updates about the new rule proposed by the Reserve Bank of India. The apex bank has said that banks shall fix their individual rates of interests for savings deposits. The RBI has also favored the deregulation of interest rates for agriculture sector, EXIM and savings account. Such deregulation is intended to encourage more financial inclusion.

At present, banks are permitted to fix their own interest rates on savings deposits exceeding Rs.2 lakhs. For up to Rs.2 lakhs, the rate is fixed by the RBI.

India Legal News: Interests Rates on Savings Bank Accounts to Be Hiked

India legal news reports that if the RBI’s new proposal materializes, you may fetch more interests from savings bank (SB) accounts. Currently, the interest rate offered by banks on SB accounts is 3.5 percent.  Once deregulated, the interest rate will become more dynamic and beneficial for customers.

Most bankers believe that such a move will lead to wide variations in the market. Besides, the rates will also depend on the conditions of the highly competitive market. The quantum of benefit will depend on the size of balance sheet and liquidity status, among others. There is a probability that banks will alter the rates as per the changing situation. However, this type of deregulation will make small savers prone to market fluctuations and interest rate fluctuations.

There is no incentive for banks to make these accounts more lucrative if rates are fixed. However, such deregulation might lead to rates being bid and will bring about some change. Experts predict that this may not affect the SB portfolios of banks. Also, customers are not expected to move their SB accounts from one bank to another, just because of slight difference in interest rate.