Time not ideal for savings rate deregulation: HDFC Bank chief

Mumbai, Feb 20 (PTI) Banks have no objection to asavings rate deregulation per se, but only to its timing asthey feel the prevailing situation is not ideal for it, a topbanker has said.

"Its fine to have savings rate deregulation and banksare not opposed to it - they only feel the present time is notripe for such a move. If it is introduced in a tight moneysituation as is prevailing now, then it would lead to chaos,"HDFC Bank Managing Director Aditya Puri told PTI here.

Today, several services are bundled together with asavings account and offered free to customers such as ATMservices and account statements. In a deregulated scenario,banks might be forced to charge customers for these services.

Banks also need to be given the freedom to fix theirown charges as the cost of servicing a savings account willincrease, he said. "We will (then) have to ensure thatservices are offered at a fair value to customers."

Currently, interest rate on savings accounts is 3.5per cent per annum. Reserve Bank has, in the past, floated theidea of deregulating the savings rate, but the idea hasreportedly run into stiff opposition from banks.

Once the savings rate is deregulated, lenders will befree to fix their own rates and "this could lead to unhealthycompetition between them," Puri said.

"Besides, it would make deposits volatile, reducingbanks'' ability to fund term projects even further," he said,adding "customers, too, would have to maintain a higherbalance in their accounts."

Banks have communicated their reservations to RBI oversavings rate deregulation in current scenario, he said.