RBI in its monetary policy on 25th Oct 2011 deregulated the Savings Bank Account Interest rate with immediate effect. Till 24th Oct 2011 the interest rate on Saving Account was fixed at 4%.
The deregulation could have significant impact on banking industry and particularly the banks with high Current Account Saving Account (CASA) ratio , as the cost of funds are bound to go up because of rise in interest rates on Savings Account.
Smaller banks with lower CASA ratio will try to mop up deposits by offering higher rates on Savings Account to customers as a result of which the larger banks will also follow the suit to keep their customers intact. Due to large number of public and private sector banks, the deregulation and competition is expected to increase the Savings account rate significantly from the current levels of 4%.
InvestorZclub tried to list the banks which could be impacted the most, both in terms of profitability and stock price.
Bank CASA Ratio CMP 52 week High / Low
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HDFC Bank 50% 468 519 / 396
SBI 47.5% 1840 3515 / 1708
ICICI Bank 42% 877 1277 / 762
Axis Bank 42% 1119 1585 / 946
PNB 40% 928 1395 / 872
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