Changing dynamics of the humble SB a/c
Opening of a
saving bank account is a ticket to the financial world for most individuals.
However banks have now realized the importance of CASA- Current Account Saving
Account - pool and have ensured that saving bank account will be a tool to
attract their customers.
The big catalyst came last year, when the Reserve Bank of India (RBI), chose to deregulate the interest rates on saving bank account. Earlier the rate of interest was at four per cent.
Now saving bank account holder can earn six per cent rate of interest on balance provided they maintain balance above threshold limit prescribed by bank. For example, if a bank account holder has on an average Rs 1 lakh in his bank account, then he would earn Rs 6000 in such bank accounts offering 6% rate of interest against. Some banks offer special bank accounts to their premium clients. These are like any other saving bank account, however the moment the client deposits more than a threshold, say Rs 25000, in this account, it automatically opts to make one year fixed deposit of that amount. Put simply, client earns the rate of interest of a fixed deposit on that amount, for the time period the money remains in the bank. For example, if an account holder maintains bank balance of Rs 1 lakh for the year, he is entitled for interest at the rate applicable for one-year bank fixed deposit - say 8%. So instead of earning Rs 4000, he takes home Rs 8000, incremental benefit of 100%.
Virat Diwanji, executive vice president of Kotak Mahindra Bank explains, “Many savings account holders grabbed the opportunity created by some of the private sector banks and shifted their money. The banks too benefited from the incremental volumes to cover the extra cost of handling these accounts. Public sector banks however kept away from this initiative.” He further adds, “Suppose someone has saved around Rs 1.5 lakhs and has kept it in the savings bank account, the interest income that he gets on the savings would be exempted from tax. Savings account also provides liquidity to tackle contingencies.”
Fixed deposits too have changed with time. Banks also prefer to come out with bank fixed deposits of 555 days 1111 days with attractive interest rates. Five year bank fixed deposits offering deduction under section 80C are also a popular investment option for investors, to earn good interest and save tax too.
V N Kulkarni, chief counselor at Abhay Credit Counseling Centre says, “There has been 11 percent growth in the number of savings account in the country.” Kulkarni adds that it is compulsory for people to have savings account linking it to Aadhar cards. “In semi urban and rural areas, people are not bothered about the hike in the interest rates, they do so purely on the basis of banking penetration and for the safety factor,” he points out.
Beyond the usual interest rates and tax benefits banks are keen to engage their clients through reward programmes. Reward programmes are on offer for saving bank account holders. Transactions such as payment of bills through net banking fetches reward points. For example, when a saving bank account holder activates his internet banking id he is offered some points. He is also given some points if he downloads the mobile banking application.
As the experts watch banking space for entry of new banks, on the back of expectations of issuance of new banking licenses by Reserve Bank of India, incumbents are on the expansion spree. Naturally the competition is getting fierce and the customer is getting benefitted in that process. Cash transfer scheme by Central Government and Aadhar card penetration should further boost the penetration of saving bank account.
The big catalyst came last year, when the Reserve Bank of India (RBI), chose to deregulate the interest rates on saving bank account. Earlier the rate of interest was at four per cent.
Now saving bank account holder can earn six per cent rate of interest on balance provided they maintain balance above threshold limit prescribed by bank. For example, if a bank account holder has on an average Rs 1 lakh in his bank account, then he would earn Rs 6000 in such bank accounts offering 6% rate of interest against. Some banks offer special bank accounts to their premium clients. These are like any other saving bank account, however the moment the client deposits more than a threshold, say Rs 25000, in this account, it automatically opts to make one year fixed deposit of that amount. Put simply, client earns the rate of interest of a fixed deposit on that amount, for the time period the money remains in the bank. For example, if an account holder maintains bank balance of Rs 1 lakh for the year, he is entitled for interest at the rate applicable for one-year bank fixed deposit - say 8%. So instead of earning Rs 4000, he takes home Rs 8000, incremental benefit of 100%.
Virat Diwanji, executive vice president of Kotak Mahindra Bank explains, “Many savings account holders grabbed the opportunity created by some of the private sector banks and shifted their money. The banks too benefited from the incremental volumes to cover the extra cost of handling these accounts. Public sector banks however kept away from this initiative.” He further adds, “Suppose someone has saved around Rs 1.5 lakhs and has kept it in the savings bank account, the interest income that he gets on the savings would be exempted from tax. Savings account also provides liquidity to tackle contingencies.”
Fixed deposits too have changed with time. Banks also prefer to come out with bank fixed deposits of 555 days 1111 days with attractive interest rates. Five year bank fixed deposits offering deduction under section 80C are also a popular investment option for investors, to earn good interest and save tax too.
V N Kulkarni, chief counselor at Abhay Credit Counseling Centre says, “There has been 11 percent growth in the number of savings account in the country.” Kulkarni adds that it is compulsory for people to have savings account linking it to Aadhar cards. “In semi urban and rural areas, people are not bothered about the hike in the interest rates, they do so purely on the basis of banking penetration and for the safety factor,” he points out.
Beyond the usual interest rates and tax benefits banks are keen to engage their clients through reward programmes. Reward programmes are on offer for saving bank account holders. Transactions such as payment of bills through net banking fetches reward points. For example, when a saving bank account holder activates his internet banking id he is offered some points. He is also given some points if he downloads the mobile banking application.
As the experts watch banking space for entry of new banks, on the back of expectations of issuance of new banking licenses by Reserve Bank of India, incumbents are on the expansion spree. Naturally the competition is getting fierce and the customer is getting benefitted in that process. Cash transfer scheme by Central Government and Aadhar card penetration should further boost the penetration of saving bank account.
S
MAYURA ET130128
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