Saraswat Bank ups interest on savings accounts to 6.14%

The country's largest urban cooperative Saraswat Bank today announced that it would offer 6% interest on savings deposits which will be payable every quarter and thus effectively paying 6.14% interest on an annual basis.

"We have decided to offer 6% interest on savings deposits, effective December 1.

In fact, since we will be making the payout every quarter, the effective rate will be 6.14% on an annual basis," bank chairman Ekanath Thakur told reporters here.

Giving the rationale for effecting the change, Thakur said, "We feel that in today's banking, the depositor is short-changed. And we, being the largest in the segment, wanted to change that and reward our depositors and also set the tone for the rest."

It was on October 25, the Reserve Bank had deregulated the yield on savings accounts and let the banks to set the pricing. However, so far only three mainstream banks, that too mid-size ones - Yes Bank, Kotak Bank and IndusInd Bank-- have followed suit.

Thakur said, on the day (November 25) the Reserve Bank issued the guidelines deregulating savings bank deposit rates, their asset liability committee met and decided to reprice the SB assets.

On the impact of this on his margins, the chairman said it will be about 40-45 basis points. The bank's current net interest margin, which is a key measure of a bank's profitability, stands at 3.78%, he added.

But Thakur sounded confident about absorbing the higher outgo by better cost rationalisation and other overhead expenses. On expansion plan, Thakur said, the bank will have 300 branches by the end of this fiscal and 500 by 2014.

Currently, the bank, set up in 1918, has 223 branches and 141 ATMs. Thakur said the bank has CASA of 28% with savings deposit accounting for 22% of its deposits while current deposits are 6%.

The overall asset of the bank stood at Rs 29,500 crore as of the September quarter out of which deposit stood at Rs 17,000 crore and the rest were advances.