GOVERNMENT OF INDIA
Ministry of Finance
DEPARTMENT OF FINANCIAL SERVICES
UNSTARRED QUESTION NO 2408
TO BE ANSWERED ON 23.12.2008
interest Rates on Saving Bank Deposits.
SHRI RAJEEV CHANDRASEKHAR
Will the Minister of FINANCE be pleased to state:-
(a) whether it is a fact that the interest rates of Saving Bank (SB) deposits of public sector banks at 3.5 per cent have remained unchanged for over a decade inspite of the increase in interest on Fixed Deposits (FDs) and high rate of inflation;
(b) if so, whether the banking industry would be advised by Government to suitably revise the interest rates on SB deposits; and
(c) if not, the reasons therefor?
THE MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI PAWAN KUMAR BANSAL)
(a) to (c): The interest rates of Savings Bank (SB) Deposits of Public Sector Banks (PSBs) were revised from 4% to 3.5% effective from 1st March, 2003. While no interest is paid on current account, interest is paid on savings bank accounts mainly to encourage savings and banking habits among the public. In view of this, interest on savings bank account is generally kept lower than the domestic term deposit rates. Progressive deregulation of interest rates in those segments that have remained regulated for reasons relevant at different times has been engaging the attention of the RBI and wide consultations have been held with various stakeholders. Based on past review of monetary and interest rate conditions, including a careful consideration of the suggestions received from the Indian Banks` Association (IBA) some time back, the RBI considered it appropriate to maintain status quo while recognising that deregulation of this interest rate is essential for product innovation and price discovery in the long run.