By Apoorva Mandhani
In a setback for 90 percent of its depositors, the State Bank of India (SBI) on 31st July 2017 cut down the interest rate on savings account deposits from 4 percent to 3.5 percent per annum, with its new two-tier savings account interest rate system. With this move, you will now earn 50 basis points less, if you have a savings account with a deposit less than Rs. 1 crore. In fact, credit rating firm, India Ratings believes that with the interest rate cycle reaching the bottom, downward repricing of existing liabilities (savings account rate cut) could facilitate a further reduction in rates.
The eye opener
While non-SBI users did heave a sigh of relief initially after the SBI rate cut owing to their choice of bank, much to the customers dismay, six other banks soon followed suit. Below is the list of Banks that have slashed their interest rates:
| Bank | Rate Cut |
| Bank of Baroda | From 4 percent to 3.5 percent |
| Axis Bank | From 4 percent to 3.5 percent |
| Yes Bank | From 6 percent to 5 percent |
| Indian Bank | From 4 percent to 3.5 percent |
| HDFC Bank | From 4 percent to 3.5 percent |
| Karnataka Bank | From 4 percent to 3.5 percent |
Financial planners have since stepped it, reiterating that ideally, you should not hold huge amounts in your savings accounts. It has been advised time and again that you should only keep in your savings account an amount that can cover your expenses for three months. Nevertheless, if you still have a huge amount in your savings bank account, now is the time to revamp your financial planning, and embrace non-traditional market players, such as DBS Banks digibank, which has brought the fintech revolution to the country.
How digibank could be your savior
Apart from offering lucrative interest rates at a time when top private and public banks have kick-started the rate-cutting spree, digibank offers a horde of other advantages over SBI:
| digibank | State Bank of India | |
| Interest rate | 7% | 3.5% |
| Online Fund Transfer | Free | Charges for online fund transfer through IMPS:
|
| Minimum Balance | No minimum balance | Monthly average balance required:
|
| Maximum Balance | No limit | No limit |
| Debit Card + Fee | Visa Debit Card, with PayWave | Basic RuPay ATM-cum-Debit card |
| ATM Transaction charges | All transactions are free. Users can also withdraw money abroad since it offers a Visa card. | ATM Transaction charges
|
When compared with traditional banks, digibank retains the advantages offered by them, along with the convenience of utilizing such facilities remotely. It would, therefore, be prudent to reassess your choice of a bank, especially at a time when traditional banks are on a rate-cutting spree.digibanks interest is credited on a quarterly basis and is considered to fetch higher interests on a long term basis. Besides, digibank redefines convenience, by allowing customers to converse with an artificial intelligence-powered assistant created in partnership with Kasisto, a fintech spin-off from the institute that created Siri. It also comes with a budget optimizer, which can budget, track expenses, analyse purchasing patterns and provide actionable advice by understanding your behaviour and preferences.
References:
a) http://www.ndtv.com/business/why-banks-are-cutting-interest-rates-on-savings-account-deposits-1737785
b) http://www.firstpost.com/business/sbi-cuts-savings-account-interest-rate-good-for-banks-but-small-savers-may-have-to-pay-a-price-3877479.html
c) http://www.timesnownews.com/business-economy/article/these-7-banks-slash-their-interest-rates-on-savings-accounts/74018
d) https://www.youtube.com/watch?v=Wk4Mwhq7R20
e) http://profit.ndtv.com/news/your-money/article-sbi-savings-bank-account-minimum-balance-requirement-read-details-here-1684227
f) https://www.sbi.co.in/portal/web/personal-banking/basic-savings-bank-account
g) http://www.ndtv.com/india-news/sbi-atm-withdrawal-debit-card-and-other-charges-details-here-1707682
h) https://www.sbi.co.in/portal/documents/28392/54637/SBI+site+upload-Service+Charges-2017.pdf/9232eba4-f332-4155-a13d-88428281bac8
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