Recently State Bank of India (SBI) reduced the rate on saving accounts based on a two tier scheme. The rate of return was reduced to 3.5% from the previous 4% on accounts with balances up to Rs 1 Crore and those account balances exceeding Rs 1 Crore continue to avail the rate of 4%.
Following in the footsteps of SBI, HDFC, Yes Bank, Bank of Baroda, Axis Bank, Indian Bank and Karnataka Bank have reduced the rate on saving accounts.
Yes Bank has reduced the rate from 6% to 5% now on accounts with balances up to Rs 1 Lakh and also has reduced from 6% earlier to 5.5% on accounts with balances exceeding Rs 1 Crore. However the rate for accounts with balances ranging from Rs 1 Lakh to Rs 1 Crore remains unchanged at 6%.
HDFC Bank on the other hand implemented the two tier scheme with the amount of Rs 50 lakhs as benchmark. All accounts with balances below ₹50 Lakhs will receive 3.5% now instead of 4% previously and all those account balances above Rs 50 Lakhs will continue at 4%.
The reason that banks cite for this cut in the saving rate is to keep the lending cost low.
Despite retail inflation, being as low as <3.5%, bank customers still receive a positive return on those saving accounts that were deregulated in 2011.
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