The move to hike interest rate on savings bank (SB) deposits to 7% from 4% by Yes Bank and to 6% by Kotak Mahindra Bank and Indusind Bank has paid off well for these mid-sized banks. The move has made their savings deposits surge 50-200% during the quarter ended March 2012.
Kotak Mahindra Bank was able to garner Rs. 1,750 crore during the quarter ended March showing a growth of 53% while Indusind Bank mobilised around Rs. 1,638 crore as saving deposits witnessed a growth of 54%. Yes Bank recorded a surge of around 200% as its saving deposits jumped to Rs. 2,504 crore at the end of quarter ended March 2012 from Rs. 800 in the same quarter a year ago.
"We witnessed encouraging response from the customers and the growth has come from existing and new customers," said KVS Manian, president-consumer banking, Kotak Mahindra Bank.
These banks hiked rates after the Reserve Bank of India deregulated the interest rate on saving deposits in October last year. Yes Bank raised interest rate on saving deposit to 7% for the customer having balance over Rs. 100,000 and 6% on balance having less than Rs. 100,000. Kotak Mahindra Bank and Indusind Bank hiked rates to 6% for balances more than Rs. 100,000 and 5.5% on amount less up to Rs. 100,000. Other banks are offering 4% interest on saving deposits.
The rate hike has also helped banks to expand their customer base.
"Acquisition of new customers increased by 5 to 6 times after the hike in saving bank deposits," said Rajat Monga, group president- financial markets and CFO, Yes Bank.