With the Reserve Bank freeing interest rate on savings deposits, the mid-size private lenderKotak Mahindra Bank said it will be offering 6 percent interest on savings deposits above Rs 1 lakh and 5.5 percent those below Rs 1 lakh effective November 1.
The eight-year-old city-based lender with just 323 branches has also increased its base rate, or the minimum lending rate below which it cannot lend, by 25 basis points to 10 percent.
Kotak Bank becomes the second lender after another city-based mid-size bank Yes Bank announced six per cent interest on savings deposits immediately after the Reserve Bank freed interest rates on savings accounts on October 25.
"We have increased the interest rate on savings account deposit to 6 percent for deposits above Rs 1 lakh, and to 5.5 percent to those below Rs 1 lakh as against 4 percent now." The new rates will be effective November 1," Executive Vice-chairman and Managing Director Uday Kotak told reporters.
Terming the RBI move to free the last regulated interest rate as "a revolutionary and path-breaking decision", Kotak said, "our asset liability committee met this afternoon and felt that we have to offer higher rates on savings accounts."
Kotak further said, "it has nothing to do with competition but it is just giving a fair deal to our customers. The RBI decision is the beginning of significant improvements in benefits for customers."
To a specific query from PTI on whether service charges will also go up along with the hike in interest rates, Kotak said, "there will be no changes in the product offerings or the prevailing charges at our bank. This is a standalone decision and is in public interest."
About the incremental cost that the bank would incur following the rate hike, its consumer banking president KVS Maniyan said, "we expect 10 to 12 bps spike in our cost of funds due to this decision. However, we are confident that it will not impact our net interest margin (NIM), as we will be making savings by better operational efficiency."
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