Yes Bank customers with at least 1 lakh in savings account to get 7%

Yes Bank customers with at least 1 lakh in savings account to get 7%

If you are a Yes Bank Ltd customer and have at least 1 lakh in your savings account, you would now earn 7% per annum, a hike of 100 basis points (bps) from the earlier 6%. The bank announced the hike on Thursday. However, savings accounts having a balance of less than 1 lakh would continue to get 6% on their deposits.

Says Rana Kapoor, managing director and chief executive officer, Yes Bank, “Our latest rate hike of 1 percentage point coincides with the Reserve Bank of India (RBI) deregulating the rates for non-resident (external), or NRE, and non-resident (ordinary), or NRO, accounts. Looking at the current volatile global economic situation, we believe the rates will be attractive."

The bank also hiked its NRE and NRO interest rates by 200 bps to 6% for an account balance up to 1 lakh and by 300 bps to 7% for deposits higher than 1 lakh.

The story so far

In October, when RBI deregulated savings account deposit rates, Yes Bank was the first to hike its rate to 6%, a 200 bps rise over the earlier flat rate of 4%. Following Yes Bank, at least three banks, including IndusInd Bank Ltd and Kotak Mahindra Bank Ltd, hiked their rates to 5.50-6% per annum, depending on the balance maintained in the savings account.

When asked about its plans in view of the current rake hike by Yes Bank, Sumant Kathpalia, head (consumer banking), IndusInd Bank said, “We are not considering any rate increase right now and will review the situation in January."

Growing depositors’ interest

On 30 October, Kotak Mahindra Bank hiked its savings account rates to 6% per annum for a balance above 1 lakh and 5.50% per annum for account balance up to 1 lakh. Says K.V.S. Manian, president (consumers banking), Kotak Mahindra Bank, “After our rate hike on savings account deposit, we saw a large number of enquiries and the number of savings accounts have risen by 50-60%."

Yes Bank has seen a rise in their savings account deposit balance. Says Kapoor, “The shift after deregulation from 4% to 6% has resulted in over 30% increase in our savings account deposit balance."

The same is true for IndusInd bank. Says Kathpalia, “We are seeing good traction on both new customer acquisition and large balance build-up. We expect to see this build-up consolidate further in the coming months."

Says Ranjit Dani, a Nagpur-based certified financial planner, “Currently, liquid funds offer around 9.5% returns. But if you don’t want to invest in liquid funds and you are an inactive investors, 7% per annum is a good rate to opt for. If you are anyway parking funds in a savings account, opting for a higher rate is a good idea."

Not everyone agrees. Some planners believe that ideally funds should be invested only as per their financial goals and shifting banks for higher interest rates would be too much work in terms of documentation, including shifting electronic clearing system, or ECS, mandates.