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8/2/2019 Deregulation of Savings Accounts
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4/29/12 Savings Account
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4/29/12 Savings Account
DEREGULATION OF SAVING BANK
ACCOUNT AND ITS IMPACT ONBANKS PROFITABILITY
Panduranga
NaiduPatrickBaretto
Prakash
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THE ANNOUNCEMENT
Effective from 25th October 2011, RBI has explicitlysent notification to all the banks for changing theirsavings bank interest rates.
Banks are free to determine their savings bank depositinterest rate.
Till now they compulsorily had to pay 4.0%.
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SUBJECT TO CONDITIONS
First, each bank will have to offer a uniforminterest rate on savings bank deposits up toRs.1 lakh, irrespective of the amount in the
account within this limit.
Second, for savings bank deposits over Rs.1
lakh, a bank may provide differential rates ofinterest, if it so chooses, subject to thecondition that banks will not discriminate in
the matter of interest paid on such deposits,44Savings A
ccount
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DEPOSIT ACCOUNTS
C U R
S A V
D E M
F I X E
C U M
R E C
T E R
C E R T I
F L E X
O T H
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MEANING OF SAVING DEPOSIT
An account used to deposit money at a bank or creditunion and earn interest on the account over time.
Usually you can add or withdraw funds at any time.Banks may require a minimum to open or to maintainthe account.
A savings deposit is a hybrid product which combinesthe features of both a current account and a termdeposit account.
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FEATURES OF SAVING ACCOUNT
v The main objective of saving accountis to promote savings.
v There is no restriction on the
number and amount of deposits.v Withdrawals are allowed subject to
certain restrictions.
v The money can be withdrawn eitherby cheque or withdrawal slip.
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FEATURES OF SA CONT
The rate of interestpayable is verynominal on saving accounts.
Saving account is of continuingnature. There is no maximumperiod.
A minimum amounthas to be kepton saving account.
No loan facility is provided against
saving account. 88Savings Account
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HISTORY OF SA INTEREST RATE
From 2002 the savingaccount interest rateremained at 3.5%.
In 2011, the interest ratewas increased to 4%.
Oct. 25th , 2011 the RBIderegulated the interestrate.
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WHY DEREGULATE SA NOW?
HOW DO BANKS OPERATE IN TODAYS
SCENARIO?
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Today banks serve their customers in a number ofways
NETBANKING
BRANCHBANKING
MOBILEBANKING
TELE BANKING
ATM
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As the administered savings deposit interest rate has notmoved in sync with the changing market conditions, it
has generally been unfavorable to savers.
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EFFECTS OF DEREGULATION OF SA
Banks having low CASA ratio will benefit as theyhave less share of saving deposits in there totaldeposits which leads to lower interest outgo.
Banks with Low CASA ratio will be first to increaseinterest rate which leads to competition. Yes Bank,
Kotak Mahindra Bank and IndusInd Bank have lowCASA ratio have already increase interest rate.
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Banks
Deposit
Below
Rs. 1
Lakh
Deposit
Above
Rs. 1
Lakh
YES Bank 6.0% 7.0%
Kotak Mahindra
Bank
5.5% 6.0%
IndusInd Bank 5.5% 6.0%
Ratnakar Bank 5.5% 5.5%
Karnatka Bank 5.0% 5.0%
All Other Banks 4.0% 4.0%Savings Account 1414
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Cont
Most saving bank accounts carry charges if thenumber of transactions exceeds the permissiblelevel, this can be happen in India as banks
margin will be hit by higher interest expenses. Customers could switch anytime if
banks dont offer same interest rate
as other banks offer.
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Cont
At present, Banks are underpressure with slow growth in loansdue to high lending interest rates, soif they increase saving bank depositrate they may have to increase
lending rate to protect margin whichleads to further slowdown in growthrates of loans and asset quality
detritions. 1616Savings Account
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PROS
May Enhance Attractiveness ofSavings Deposits
Will Improve Transmission of
Monetary Policy
May Lead to Product Innovations1717Savings Account
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CONS
Possibility of an UnhealthyCompetition
Risk of Asset Liability Mismatches
May Lead to Financial Exclusion
Could Adversely Affect Small Savers /
Pensioners Possibility of Introduction of Complex
and not so Easily Understood Savings
Products 1818Savings Account
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Sr. No Bank CASASaving Bank
deposit as % ofTotal Deposits
NetInterestMargin
1 Axis Bank Ltd 42% 23% 3.37
2 Bank of Baroda 33% 25% 3.03
3 Bank of India 27% 21% 2.76
4 Canara bank 29% 21% 2.92
5 HDFC Bank ltd 53% 31% 4.85
6 ICICI Bank Ltd 44% 30% 2.33
7 IDBI bank Ltd 22% 8% 1.98
8 Indusland Bank Ltd 28% 9% 3.78
9 Kotak Mahindra Bank Ltd 31% 12% 5.99
10 Punjab National Bank 39% 31% 3.91
11 State Bank of India 45% 33% 3.27
12 Union Bank of India 32% 23% -----
13 Yes bank Ltd 11% 2% 2.88
14 Indian overseas bank 30% 22% 2.9919
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Excel Sheet
2020Savings AccountDeregulation and Its
http://var/www/apps/conversion/current/tmp/scratch31147/draft%20excel.xlsxhttp://var/www/apps/conversion/current/tmp/scratch31147/draft%20excel.xlsx8/2/2019 Deregulation of Savings Accounts
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Reduction in Profit Margin No. of Banks
More than 50.00% 2
Between 50.00% to 40.00% 0
Between 30.00% to 40.00% 5
Between 20.00% to 30.00% 12
Between 10.00% to 20.00% 26
Betweem 1.00% to 10.00% 19
Less than 1.00% 14
Total 782121Savings Account
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What will Banks do?
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No change SBI.Increase the savinginterest rate without
changing any other rates.
Increase the savinginterest rate and also
interest rate on loan
Become cost effective,Efficient in operation
and create a new trend inthe market.
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THANK
YOU
AND IT HAS MADEALL THE
DIFFERENCE
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