igh savings account rates may hit net interest margins for banks: Crisil Research

MUMBAI: Higher savings account interest rates may pull down net interest margins for banks by around 10 basis points but the impact on net profit will be partly offset by higher fee income, Crisil Research said in a note on Tuesday.

"The impact would be higher for banks with a higher proportion of savings accounts in their deposit mix," Ajay Srinivasan, head of Crisil Research, said.

For large banks such as State Bank of India , Punjab National Bank , HDFC Bank ,and ICICI Bank savings accounts constitute 30-35 percent of their total deposits. For relatively smaller banks it is lower at 15-20 percent.

The pressure on net interest margins is likely to further increase if the RBI deregulates savings account deposit rates, Crisil said.

To compensate for this rise in cost of deposits, banks may impose additional charges for providing various facilities on the savings account such as charges for non-maintenance of minimum balance requirement, additional cheque issue charges, and a limit on the number of free transactions, it said.

As a result, the impact on net profit due to higher costs will be partly offset by the increase in fee income, it said.

Source: EconomicTimes