Shocker! For first time interest on savings account will be cut

Mumbai: You are in for a big shock. This will happen for the first time, and all the honest taxpayers will suffer. All this because of note ban. Many banks are planning to reduce interest rate on savings account.

Worst still is the fact, the move is being initiated by government banks. This because they are flush with low-cost deposits after noteban.

For you this means that you would get less money for keeping money with banks in savings accounts.

Savings accounts are used mostly by small depositors. This gives depositors interest between 4% to 6% interest rates. These rates have remmained unchanged for a long time.

However, banks are now flush with low-cost funds from the deposits made after note ban and planning to cut rates on savings account now.  The hint of cut on interest rate was given by Punjab National Bank. “Banks have made huge cuts in MCLR (marginal cost of funds-based lending rate) without cutting deposit rates,” Usha Ananthasubramanian, PNB MD and CEO told a private news channel. "The month-wise cuts (in lending rates) that have happened are more than what RBI would have passed on during this period,” she added.

MCLR serves as a benchmark for deciding various lending rates, including home loan interest rates. Almost all banks have cut benchmark lending rates owing to a surge in liquidity in the system due to sudden deposits.