De-Regulation of SB Interest Rates in India

De-Regulation of SB Interest Rates in India

For the past one week or so, there have plenty of news articles, stating that Reserve Bank of India, intends to de-regulate the SB Interest rates in our country.

The present SB Interest rate i.e 3.5% is regulated by RBI. And over the years, there has been a general demand to free SB interest rates from RBI.

RBI now feels that it is time for the SB interest rates to be freed.

And going by the mood, this Notification might be released in the near future.

Is this a good move?

Yes, every action has good and bad associated with it.

The Good:

n  Increased competition for the Customer’s accounts might lead to an increase in the SB interest rate.

n  Banks will spend more on Advertisements (TV and Print), to attract new customers. This is good news to the Print and TV Industry.

The Bad:

n  Banks might offer high SB interest rate, but also hike the Service Fees of Services attached to the respective SB Product.

n  Mis-selling might increase which will result in higher complaints to the Bank’s customer’s care department as well as RBI and BSCBI.  This will prompt RBI to intervene and regulate the Service Fees attached to SB accounts.

n  At present, transactions through the Electronic Payments channel are on increase. And, a SB Account number is updated at many locations to receive funds. Frequent closure and opening of SB accounts will impact the ePayments channel.

n  The ALM Desk of the Banks will be very busy. Any change in the SB interest rate, means fine-tuning the FD Interest rate too. The SB Interest rate cannot be changed in isolation.

Hm, I should say exciting times ahead, if RBI decides to free the SB Interest rates.

Yes, I am in favor of it, for this will lead to lots of action in the Banking Industry.

2 thoughts on “De-Regulation of SB Interest Rates in India”

  1. I don’t see ‘action’ in the banking industry as a net positive, for any value of action. i think banking needs to be a boring, safe and predictable creature if one wishes to have sustainable prosperity levels among the populace.

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