Bank saw 30 per cent rise in savings deposit balances in the last two months.
YES Bank on Thursday intensified the deposit rate war, increasing the interest rate on savings deposits for the second time in two months. The private sector lender would now offer seven per cent interest on savings deposits above Rs 100,000 to strengthen its low-cost deposit base.
YES Bank was the first bank in the country to raise the savings deposit rate, after it was deregulated in late October. The bank had increased the interest rate by 200 basis points to six per cent. The lender said for deposits below Rs 100,000, it would continue to pay six per cent interest.
According to Rana Kapoor, founder, managing director and chief executive of YES Bank, the lender recorded a 30 per cent rise in savings deposit balances in the last two months, after it increased the savings deposit rate. “We will build on this momentum and accelerate further. It is critical to our strategy,” he said.
YES Bank’s savings deposits accounted for only two per cent of its total deposit base as of September-end. Low-cost current account and savings account deposits accounted for 11 per cent of total deposits. At the end of the July-September quarter, the bank’s deposit base stood at Rs 44,076 crore.
In October, the Reserve Bank of India had deregulated the savings deposit rate, the last bastion of administered rate regime. All banks were paying a uniform rate of four per cent on savings deposits till then.
Earlier this week, Karnataka Bank had raised its savings deposit rate by 100 basis points to five per cent. Three other private sector banks, Kotak Mahindra Bank, IndusInd Bank and Ratnakar Bank, along with Saraswat Bank, had raised their savings deposit rates.
Public sector banks, including the country’s largest lender, State Bank of India, and large private lenders like ICICI Bank, HDFC Bank and Axis Bank have not raised their savings deposit rate, as these said savings deposit accounts were typically used for transactional purposes.
Even banks that have raised the rates are not in a hurry to revise their savings deposit rate anytime soon. “We are pretty comfortable with our current rate. We have seen significant traction in our new account acquisitions after we raised the savings rate in November. Beyond a point, rates have to be seen along with other features and services being offered, as savings accounts are predominantly transaction accounts. At this point, we don’t see a real need to react,” said Rajeev Ahuja, head of strategy and financial markets, Ratnakar Bank. The bank offers 5.5 per cent interest on its savings deposits.
Kotak Mahindra Bank said it had no immediate plans to raise its savings deposit rate further. The bank pays six per cent interest on deposits above Rs 100,000 and 5.5 per cent for deposits up to Rs 100,000. “We have not decided on a further hike in our savings deposit rate,” said K V S Manian, group head of consumer banking, Kotak Mahindra Bank.
IndusInd Bank said the balances in its savings accounts had shown good growth after it raised the rate and there was no immediate plan to raise the interest rate on these accounts.