Rating agency Crisil Ltd, in a report released on Monday, said that bank customers having savings accounts, especially salary accounts, will see a benefit of up to 25% from 1 April in the way the interest on the accounts are calculated. According to a Reserve Bank of India’s (RBI) ruling, effective 1 April, banks will have to pay interest on a daily basis.
At present, if you have a savings bank account, you get interest on the lowest balance in your account between the 10th and the last day of each month.
Crisil says that banks that have a higher proportion of salary accounts, which typically see money coming in and going out swiftly and in large proportion, could face a higher burden than banks that have more dormant accounts.
“Crisil predicts that the cost of deposits for banks will increase by 10 to 20 basis points depending on the share and pattern of their current and saving account in their deposit base,” says Suman Chowdhury, head (financial services ratings), Crisil.
Out of the total deposits (including term and fixed deposits) that banks have, the share of current and savings accounts (CASA) deposits is about 33%. Current account holders do not get interest payments on their deposits. Besides, higher CASA levels, so far, have also been on account of low interest rates.
Typically, when interest rates on fixed deposits are low, investors prefer to park their money, albeit on a temporary basis, in their savings accounts.
The country’s largest lender State Bank of India has over 15.6 million savings bank account holders.
Going ahead, Crisil says, even though the interests on savings accounts would go up, higher interest rates on fixed deposits would result in customers shifting from savings banks to fixed deposits, thereby minimizing the effect of a higher interest cost on CASA accounts.