Banks with low current account savings account (Casa) balances have been on an advertising overdrive ever since the Reserve Bank of India unshackled savings account rates.
The strategy has paid rich dividends.
“Our savings account balances have grown by `900 crore, or 26% quarter on quarter, in October-December. The total savings balance now stands at Rs4,400 crore,” said KVS Manian, president, consumer banking, Kotak Mahindra Bank.
Kotak Mahindra was one of the early birds to raise savings rates after the Reserve Bank of India deregulated these in its October monetary policy review. Kotak Mahindra Bank currently offers an interest rate of 6% on balances above Rs1 lakh, while for those up to Rs1 lakh, it’s an annual 5.5%.
Similarly, Yes Bank, which was in fact the first to get off the block soon after the deregulation, has seen a 40% jump in savings balances compared with the previous quarter.
“Our savings balance as of December stood close to Rs1,200 crore compared with Rs800 crore-odd in September,” said Rajat Monga, president, financial markets and chief financial officer, Yes Bank.
The bank offers the highest rates in the market, offering as much as 7% on accounts with balances above Rs1 lakh and 6% for those up to Rs1 lakh.
Higher balances are only part of the story. Increased rates mean there is also a perceptible rise in the number of new accounts for these banks.
While addition of customers has already gone up four times, Monga expects this to grow another 10-fold in the next 3-6 months.
“While the rates themselves are a good proposition for this increase in balances, marketing and the groundwork by the bank are important too,” Manian said.
But the script has played out a bit differently for most large banks which have so far stayed off raising rates for the fear of their margins getting impacted adversely. But for smaller banks, a smaller customer base works to their advantage, which seems to have been leveraged to the hilt.
Many bankers feel these rates are not likely to climb down in the immediate future.
“We would like to keep these rates sticky. These interest rates will not come down in the next three months, for sure,” Manian said.
IndusInd Bank has also joined in, which has raised interest rates on these accounts.
The bank offers 5.5% on accounts with balances up to Rs1 lakh and 6% on accounts above Rs1 lakh. Other banks like Ratnakar Bank and Karnataka Bank are also part of the club.
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