Kotak Mahindra Bank on Thursday cut the rate of interest on savings account deposits above Rs 1 crore and up to Rs 5 crore to 5.5% from 6%. However, it left the rate on deposits above Rs 1 lakh and up to Rs 1 crore unchanged at 6%. The interest rates on deposits below Rs 1 lakh and above Rs 5 crore were also left unchanged at 5% and 5.5%, respectively, the private sector bank said in a statement. “Effectively, 99.9% of our savings account customers continue to enjoy the same savings interest rate as before,” said Shanti Ekambaram, president – consumer banking, Kotak Mahindra Bank. “Our focus continues to be on building a quality retail franchise. Hence, we are holding our savings interest rate in the retail segment,” Ekambaram said. In the previous quarter, Kotak Mahindra Bank’s low-cost current account and savings account deposits increased to 43.9% of total deposits, from 37.4% in the year-ago period.
The bank’s total deposit stood at Rs 1.6 lakh crore. Earlier this week, State Bank of India cut its interest rate on savings account deposits of less than Rs 1 crore to a six-year low of 3.5% from 4% and said large outflows in deposits that had come in due to demonetisation made it difficult for the bank to maintain its MCLR at the current levels. The surprise move by SBI broadens the opportunity for other lenders to garner a larger share of the savings account deposits. Another private-sector lender, YES Bank, also offers 6% interest on savings accounts.
Some of the payments banks and the small finance banks offer a higher rate of interest. Au Small Finance Bank offers up to 6.50% on savings deposits, while Airtel Payments Bank offers 7.25%. After the RBI reduced its key repo rate by 25 basis points to 6% on Wednesday, state-run lenders, including Bank of India and Union Bank, said they were considering a cut in their lending and deposit rates.