Sidhartha & Surojit Gupta | TNN
New Delhi: Kotak Mahindra is not looking to reduce the interest rate on savings bank deposits as it has helped the private player grow the base at nearly twice the industry rate, top executives told TOI.
The bank currently offers up to 6% on savings bank deposits, seen as a dependable base for low-cost funds for banks. This rate is higher than the recently revised 3.5% paid by the State Bank of India (SBI), the country’s largest bank. SBI pared interest rate by half-a-percentage point from 4% earlier, prompting some others to follow suit.
Shanti Ekambaram, president for consumer banking at Kotak Mahindra Bank, said, “A 6% rate makes a difference on acquisition (of accounts) but it is not the only factor that makes customers stick.” She said that the bank’s current account and savings bank (CASA) base has seen a 40% compounded annual growth, when the industry growth was of the order of 15-18%. During the quarter ended June 2017, savings account balances grew 44% for the bank, which she said was nearly two times faster than the industry average.
Kotak Mahindra president and COO Mohan N Shenoi added that, as a proportion of total deposits, CASA accounted for almost 44% of the pie, and with 6.8% of the deposits coming from funds that are swept out of accounts into term deposits, the total base is closer to 50%. Top private lender ICICI Bank has a higher proportion of CASA, while HDFC Bank has a similar level despite offering lower interest rate on savings bank, but had an early mover advantage.
Ekambaram said that with the average cost of savings bank accounts estimated at 5.5%, they were still cheaper than 6.75-6.9% offered on one-year term deposits.
Launches drive for Army Welfare Fund
As part of its 811 campaign, Kotak Mahindra has launched a special drive to raise funds for the Army Welfare Fund. All accounts opened between now and September 15 will see a lower debit card fee – Rs 99 in the first year instead of 299 earlier – with the money transferred to the fund.
“The entire proceeds generated from the sale of the limited edition physical debit card from August 7 to September 15 will be contributed towards the education of our soldiers’ children and the rehabilitation of our wounded-in- action soldiers,” said Kotak Mahindra president and COO Mohan N Shenoi.
As part of the 811 campaign, which allows opening of accounts through the phone, the bank has opened one million accounts since it was launched at the end of March.