Pay savings a/c interest quarterly: RBI to banks

After asking banks to calculate the savings deposit rates on day to day basis at 4%, the Reserve Bank of India wants banks to pay the interest to depositors at a uniform period of three months.

At present, each bank follows its own schedule including monthly, quarterly and and half yearly for paying interest rates on savings accounts.

The central bank has taken up the issue with the bankers when a delegation from Indian Banks' Association led by Bank of Baroda CMD and chairman of IBA MD Mallay met two RBI deputy governors Shyamala Gopinath and Anand Sinha to discuss issues. It was part of the central bank's annual monetary and credit policy announced on May 3.

Speaking to FE Mallay said that the central bank had explored the issue of bank shifting to a uniform period of quarterly payment on savings accounts.

“We have explained the RBI that it is better to give freedom to banks on the issue. The customer is not losing anything though the banks are following their own schedule for the payment of the interest rates. Each bank has its own infrastructure to serve the depositors and at present it is working well,'' he said.

Mallya further said the bankers are yet to give their suggestions on the issue of deregulation of savings rate to the RBI which has already released a discussion paper on the subject.

However, hinting at the bankers reluctance to go for deregulation of savings rate in near term Mallya said, “Though all of us agree savings rate has to be deregulated, it has to be done at a right time. This is not the right time to go for the deregulation of savings rate. The banks need to design schemes balancing their cost and the services they have to provide in the deregulated regime. The bankers have also asked RBI for further clarification on the issue of banks investment in the liquid mutual fund schemes.

Mallya said the bankers have discussed with RBI about the adoption of advanced approaches under Basel II.

“We are all now preparing ourselves to adopt the new model. RBI has asked us to keep it informed about our readiness so that it can allow us to go for the new model,'' commented Mallya.

The bankers have discussed with RBI about the implementation of IFRS from April.