Yes Bank raises domestic savings rate to 7%

Yes Bank raises domestic savings rate to 7%

Mumbai/New Delhi: India’s Yes Bank raised its domestic savings deposit rates to 7% from 6% on Thursday, becoming the first bank to raise rates twice this year as it takes advantage of recent deregulation to help build up its retail business.

“It is more of a marketing strategy, a way of customer acquisition...They hardly have any savings (deposits)," said Vaibhav Agrawal, a banking analyst with Angel Broking.

“Going forward, the bank plans to increase its retail customer base. So far, it has been more of a corporate or wholesale-based kind of a bank," Agrawal said.

The RBI’s move to deregulate rates has provided a boost to smaller lenders, which moved quickly to raise rates.

Savings deposits are a source of low-cost funds for banks, making up about 22% of their total deposit base. Larger banks have traditionally dominated the sector, which also accounts for about 13% of household savings.

Bigger banks such top lender State Bank of India, ICICI Bank and HDFC Bank have not even tried to match the rates being offered by smaller banks, given their market dominance in both current and savings accounts.

“The market share and the distribution base of the bigger banks is beyond the reach of Yes Bank," Agrawal said.

Yes Bank said also it raised its non-resident Indian savings account deposit rate by 200 basis points to 6% for deposits up to Rs100,000. For balances above Rs100,000, it raised the rate by 300 basis points to 7%.

Late on Wednesday, smaller lender Lakshmi Vilas Bank also raised its interest rates for non-resident customers effective Thursday.

Shares of Yes Bank, which has a market capitalization of about $1.7 billion, were up 0.94% at Rs252.70 at 10:55 am. The overall Mumbai market was down 0.9%.