Even as banks led by State Bank of India started cutting interest rates and India Inc hailed the repo reduction as “very good” for economy, bankers sought a reduction in the interest rates on small savings schemes on fears of flight of cash from bank deposits to such schemes.
Dena Bank chief Ashwani Kumar said factors beyond cost of deposits govern the bank’s rate strategies. Interest rates from the small saving schemes like PPF and NSC are one of the major impediments for the rates being higher, he said. Uday Kotak of Kotak Mahindra Bank said he would welcome if the small saving rates are cut by a similar measure of 0.50 per cent to around 8.25 per cent level. “Saver has a psychological issue if it goes below 8 per cent. It starts getting tougher to get money unless he is made to understand that inflation rates are dropping significantly,” he told a news channel.
Arundhati Bhattacharya, chairman, SBI, said: “Overall, the policy announcement has a slew of positive surprises with the most notable being the projection of a benign inflation trajectory even throughout FY17 and reaffirmation of a continued accommodative policy.”
“The timing is very good as the festive season is coming,” Godrej Group chairman Adi Godrej said. Assocham president and Yes Bank managing director and CEO, Rana Kapoor, said this consolidated action will also prompt monetary policy transmission.
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