Savings rate cut will impact the common man

The recent move by some of the leading public and private sector banks to curtail savings bank interest rate by 50 bps is a retrograde step and inimical to the interests of the average depositor. Needless to add that the savings bank deposits constitute one of the core components of the deposit base of almost every bank and provide the necessary wherewithal for the bank’s loanable funds. The introduction of dual interest slabs for Savings Bank deposits has further queered the pitch for the average depositor, who is totally at a loss to understand the sudden drop in interest earnings on his hard-earned savings. In one fell swoop, Indian banking has regressed backwards to the pre- nationalisation days, with a pronounced bias in favour of the classes rather than the masses. With this move, the logic of reducing the deposit rate in order to pass on the benefit to the borrowers simply does not work.

There are several other avenues open to the banks for curtailing the controllable expenses to the barest minimum. Retaining the earlier savings rate of 4 per cent for the privileged classes maintaining deposits above the threshold mark also militates against the canons of fair play and equity in our banking landscape teeming with millions of small depositors. In our hurried push towards digitisation of banking services, the recent hike in service charges, minimum balance stipulation, restriction on the number of free ATM operations and cash withdrawal stipulations at the branches etc. have already made life uncomfortable for the small depositor. The savings rate cut has further compounded his miseries. It is high time that the banking regulator takes cognisance of these problems affecting the common man and directs the banks to provide some relief to the common man.

Amit Banerjee

(The views expressed by the author in the article are his/her own.)

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