Deregulation of interest rates on savings accounts on radar: RBI | business | Hindustan Times
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Deregulation of interest rates on savings accounts on radar: RBI

The Reserve Bank today said deregulation of interest rates on savings accounts is on its radar and it will soon be examining the possibility of implementing the same.

business Updated: Sep 08, 2010 12:59 IST

The Reserve Bank on Wednesday said deregulation of interest rates on savings accounts is on its radar and it will soon be examining the possibility of implementing the same.

"Deregulation of interest rate is on our radar. A working group will soon be set up to examine the possibility of deregulating interest rates," Reserve Bank's Deputy Governor, Usha Thorat, said while addressing a banking conference organised by FICCI and IBA in Mumbai.

"We have to examine whether the de-regulation can help bring more people into the formal banking system," she said.

At 3.5 per cent per annum, interest on savings accounts is the only regulated rate in the banking system presently and a highly contentious one given its impact on the common man.

For achieving the goal of financial inclusion, there is a need for a higher number of tie-ups between banks and the non-bank finance companies (NBFCs) have better delivery systems to ensure better last mile connectivity, Thorat said.

The senior RBI official also said that the apex bank is in the process of "tweaking" regulations on securitisation to ensure the growth of the securitised market in an orderly manner.

Banks should also ensure that there is no excessive borrowing as such borrowings can lead to the formation of bubbles which can deter stability, she said.

Looking at the high growth in credit in recent years, Thorat advised banks to do more "forward looking provisions" to cover their non-performing assets (NPAs) whose increase is "inevitable" in the future.