The nation's largest lender State Bank has welcomed the RBI decision to hike the interest rate on savings deposits saying, the measure will in fact bring down the cost of its funds.
"For a bank like ours, it (hike in interest rate on savings deposits) does (augurs well (People are) keeping Rs 9.5 lakh crores at home in cash because of the low interest rate (on savings deposits.) They are not comfortable in committing money in long term deposit," SBI chairman Pratip Chaudhuri told reporters after the post-policy meet with the RBI governor.
On whether the step will increase his cost of funds, he replied in negative. "No, in fact it will help me bring down the cost of my funds. In fact, our average cost of funds may come down because of the savings rate going up," Chaudhuri said.
He further pointed out that the cost of maintaining savings accounts is zero, especially in a CBS system, "so incremental cost is very low," the chairman said.
On whether SBI will increase its lending and deposit rates following the RBI policy, he refused to give a clear answer.