State Bank of India (SBI) on Wednesday said it won’t hike the rate it offers on savings bank deposits unless other major banks resort to a similar move.

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“We do not plan to change the rate. My personal view is that the Reserve Bank of India (RBI) will go for a pause in interest rate hikes. If RBI itself is expected to pause the rate hike cycle, then where is the question of hiking savings deposit rates?” asked Rajeev Nandan Mehra, chief general manager (personal banking), SBI.

The Reserve Bank of India (RBI) had on October 25 deregulated interest rates on savings bank deposits, leaving it to the banks to offer whatever they wanted.

That same evening, Yes Bank, which has only a 3% current account and savings account (CASA) deposit ratio, announced it will offer 6% interest rate on savings accounts to lure retail customers.

This was followed by Kotak Mahindra Bank, which is currently offering 6% interest on deposits to its savings bank account holders.

IndusInd Bank, on the other hand, is offering 5.5% on savings bank deposits.

SBI, however, continues to offer 4% interest to its saving bank account holders.

According to Mehra, a 50 basis points increase in the savings bank deposit rate will push up SBI’s costs by `1,500 crore. The hikes effected by the smaller private banks don’t worry Mehra. “My total interest outgo in savings bank is higher than the savings bank balance in some of the banks. Each bank will respond to the situation of hiking the savings bank deposit rate based on its own needs.”

But the stance could change if bigger banks went ahead with similar hikes, he admitted, adding that SBI would have to respond to the situation appropriately.

For now, SBI’s decision to hold the savings bank rate at 4% comes as a relief to other banks, which haven’t hiked rates yet but would have been forced to follow.    

"We as a large bank will have to react to the changing environment if SBI hikes the rate,” said Ram Sangapure, general manager- retail banking, Central Bank of India.

According to Sangapure, a 50 basis points hike in the savings bank deposit rate will push up Central Bank’s costs by `150 crore. N Seshadri, executive director, Bank of India admitted as much. There is ample liquidity in the system and interest rates have stabilised and shall start falling after some time, Seshadri said, adding, his bank will not hike the interest rate on savings deposits.