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  • Category: Miscellaneous

    SBI has reduced rate on saving deposit: but why?

    Yesterday State Bank of India (SBI) announced that the rate of interest on deposits in savings accounts of SBI would be reduced to 3.5% per annum from existing 4% per annum. But there is an exception. If the the balance amount in SBI savings account is above Rs. one crore, then the interest rate will remain unchanged.

    Now what is the purpose behind such order? Apparently the Government and SBI want to discourage people to keep money perked in the savings account. They want to discourage this trend. So, the reduction of rate of interest. They want the money invested in equities. But if the intention is so, why is there an exception for people keeping more than Rs. one crore in their saving account? What is the justification in those exceptional cases?

    Members, can you please clarify the issue?
  • #604734
    This type of things are mainly encouraged by governments inorder to prosper themselves by collecting taxes and to flow the money in to Corporate investments. The only policy followed by government is, people don't save money for the future and enjoy what you have with you now. Governments or Private sectors are not paying pensions at present and they don't allow the people to save money for the future. All the old age people will suffer like anything in coming years. Why such mad policies are followed by governments no one knows?

  • #604738
    First of all, Truth is no banks want money to be invested somewhere else. Every bank in banking industry wanted more and more cash to be in the bank account. This is why they are giving 4% to accounts with 1 crore or more. But every rich people knows that 4% return is nothing but to be invested in businesses or invest in real estate. This rule is to encourage people with high wealth to remain invested in savings account.
    I do agree, old age people will suffer as they keep hard earn money in SBI.

  • #604743
    No one will keep more than 1 crore in S B Account. They will always try to see that they will get maximum rate of return on their investment. Keeping 4% for above 1 crore is a eye wash. Probably Government wants more money circulation instead of keeping in Bank. They have decreased F D rates also last year I think. They want to encourage investments in other areas like, Shares, Mutual Funds, and other activities. There the returns will be high but a little risk is there. If we keep in Debt funds risk maybe less. That will give better yield than bank rates. Probably government wants people to earn more through their savings in these instruments than in SB accounts. Nobody is interested to keep money in SB account. so ultimate effect on our savings may not be very severe and may not have much impact on our savings. Old age people also can keep their money in FDS with sweep in facility so that they can get higher rate of interest. As senior Citizens they will get 0.5% extra interest on FDs.
    always confident

  • #604746
    Whenever RBI changes its monetary policy and related interest rates the banks follow it accordingly. The effect of change in monetary policy immediately effects the Bank fixed deposit rates and Bank loan rates.

    During the last few years there is a continuous decline in Bank FD rates and now there is more to follow. As saving bank interest is already low normally banks do not decrease it.

    Due to various reasons like high NPA and increase in working cost probably banks are looking other avenues of increasing its income. We all know that banks are collecting fee for SMS based services and many other services which were earlier free.

    It seems banks are not satisfied with this and want to take advantage in other untouched areas like saving Bank.

    This action by SBI shows that they are now desperate to make money from all the operations including saving Bank.

    Knowledge is power.

  • #604747
    #604734 : The interest rate reduction regime started during the tenure of Raghuram Rajan, the previous RBI Governor, and it is still continuing. The basic purpose of reduction of interest rate is to control inflation. The present reduction of interest in savings account by SBI is a part of the same regime.

    However, there is no doubt that this is harsh for retired employees.

    'Nayak nahin; Khalnayak hoon main' (I am not the hero; I am the villain)

  • #604766
    Remember old age people accumulate little little amounts through fixed deposits from their younger age to get some fixed amount to deposit as FD to get some reasonable livelihood at the older age. One more thing is why they are charging more interest for the loans they are giving to the customers?

  • #604788
    Since the latter half of nineties our country is compelled to follow the modern western economic dictates.
    That principle is : ' not saving, but spending boost s economy'. Their interest is purely commercial and made and propagated in their favour via the colossal multinational corporate.
    This can be amply proved by the loud cry for decreasing the interest rates for borrowings. There is no sound given against the decrease in deposit interest rates.

    When the spread (gap) between the deposit rates and loan interest rates become very less, banks tend to get low profit or even loss. So they will naturally lower the deposit rates as there will be resistance from the corporate borrowers and lobbies.

    So the new economic mantra is to borrow and spend and enjoy. That is why EMIs, credit cards, and many other financial derivatives are designed and propagated with smart and tempting marketing strategies.

    Naturally low deposit interest drive small savers to other avenues promising more return, but which are more risky. The big business and large multinational corporate thus enjoy money from small savers through financial markets and boost their profit without the need to pay interest to the banks.
    The irony, however, is that there is no ceiling limit for the profit making by such large business and corporate.
    Just like there is control in the interest rates, there should be statutory control in profit margins. Then only there will be fair and level playing field for all and individual an economy will grow.

    The present scenario brings me to some earlier situation:

    I remember that during the nineties or so (when Sri Chidambram was the Finance Minister), he brought in some drastic changes in interest rates, rate slabs and period slabs. He coined some unique terms. It was at the behest o some international banks and some new generation private banks who opened business a little earlier. That caused great imbalance for the nationalised banks, and their plea against the' teaser rates' was not heard. Unwillingly they followed suit .But when the nationalised banks entered the scene, the private and multinationals lost their edge and they cried for withdrawal of the reforms, which the FM has to accede.

    I smell a similarity now also.

    If we take the inflation rate(practically the price rise for consumers) the return is negative. That is not good for long run. I am of the view that this is a wrong step and can cause havoc to the stability of our economy in the long run when people would have shed their savings habit by constant reduction of deposit returns.

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