Interest hike on SB stash? not yet

HYDERABAD: Customers looking for a higher rate of return from their savings bank (SB) accounts may have to swallow their disappointment with the country’s largest bank, the State Bank of India (SBI), ruling out an immediate rake hike.The announcement by SBI scotches anticipation of a rate war among banks to attract customers.Following the deregulation of interest rates on SB accounts by the Reserve Bank of India (RBI) last week, public and private sector banks such as HDFC Bank, ICICI Bank, Punjab National Bank and State Bank of Hyderabad indicated an upward revision of rates but decided to wait for SBI to make the first move.But the SBI said Tuesday that it too would watch the competition first.“We are confident of the people’s continuing trust in the various facilities being provided by us.No major bank has increased the interest rate on SB deposits.Those who have done so are not big ones,” said Pratip Chaudhuri, chairman of SBI, which has about 34 per cent of its total deposits in SB accounts.Prior to the deregulation, banks offered a flat 4 per cent per annum on SB accounts.But so far only three private sector banks, YES Bank, Kotak Mahindra Bank and IndusInd Bank, have increased their interest rates on SB deposits by up to 200 basis points (100 basis points equals 1 per cent).Unlike a uniform interest rate on SB accounts, competitive rates by banks may encourage customers to shift from one bank to another in search of higher returns.Analysts anticipate a 1-2 per cent upward revision in rates by both public and private sector banks in the near future.That means rates are likely to go up from the present 4 per cent to over 5.5-6 per cent.“We are considering a rate hike and a decision will be taken within this quarter (before the end of December 2011),” said M Bhagavantha Rao, managing director of SBH.He added that an increase in rates may impact the bank’s net interest margin in the coming quarters.Indian Overseas Bank too said that while it is certain that interest rates on SB accounts will go up, it would however wait for some time before taking a call.Similarly, the Punjab National Bank said it would take a view after seeing market trends.