The new method of interest rate calculation — daily average method — on the savings accounts would increase the cost of deposits for banks by 10-20 basis points (100 basis points is 1 per cent) said a Crisil report released on Monday.
The new method of interest calculation, which got applicable beginning April 1, will also benefit the customers by increasing their interest income by 10-25 basis points.
“While the adoption of the daily average method will result in some increase in the cost of deposits for banks, the increase is likely to be marginal and in itself will not have a material impact on the earnings profile and, consequently, the credit quality of CRISIL-rated banks,” said Suman Chowdhury, head, financial services ratings, Crisil.
According to the report, the increase in cost of deposits for banks will depend on the share and pattern of the current and savings accounts of individual banks. “The impact is expected to be higher for banks that have a dominant share of salary accounts with highly fluctuating balances.”
The report also said that the new method of interest computation will increase the effective rate of interest on savings balances, especially for the salary account holders.
“It is estimated that for a salary account holder with a minimum savings balance between 1-2 times of the monthly salary, the increase in interest income will be between 10 and 25 per cent,” said the report.