Savings rate deregulation may help smaller banks

CLSA sees deregulation of savings rate could increase banks' cost of savings deposits by 150 basis points as these rates get benchmarked to short-term fixed deposits.

CLSA sees deregulation of savings rate could increase banks' cost of savings deposits by 150 basis points as these rates get benchmarked to short-term fixed deposits.

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"We believe a 100-150bps differential in savings rate offering between two banks may not really lead to frequent switches by customers," CLSA said in a note.

"However rate differential may impact incremental market share, especially in shorter periods, small private sector banks like YES Bank, Indusind Bank and ING Vysya Bank may use this to build their market share in savings account category," CLSA said.

Banks with high savings account proportion are State Bank of India (36%), Punjab National Bank (31%) and HDFC Bank (30%), would be able to pass on the increase by levying transaction charges and raising lending rates. At 1.25pm, The Bank Nifty was down 2.23% at 9432.20.