Savings account interest rate deregulated

There is something to cheer for all Indians this Diwali.Because Reserve bank of India(RBI) has deregulated the savings account rate.

So far every saving account was earning 4% annual interest in their bank balance.This 4% annual interest was fixed for all banks as indicated by RBI.This interest is calculated on daily balance from some time. 

What does deregulation of Saving bank account rate?
As per new guideline from RBI on 25th October 2011,Every bank can decide their on saving account interest rate. So there will be good competition between many private and nationalized banks.They need to come up with good solutions for the account holders.

How does deregulation of Saving account interest rate help account holder?
Many people does not invest idle money from their bank accounts and end up getting on 4% interest on idle money. If this applicable to you then you can switch to bank who are giving more interest on saving account.But you need to wait for some time before all banks review their products and underline offerings.
Bank has to give uniform interest rate upto Rs 1 lac and there can be different interest rate above Rs.1 lac.

Quick reaction of few Banks
1)Yes Bank has increased their saving account interest rate to 6% from current 4% for all account holders immediately. This is definitely good for account holders.
2) SBI said they will not change rate immediately and will review it later. 
3) ICICI Bank and HDFC also will review it later.

Impact on Bank's Earning
Definitely this will be big impact on bank's earning because so far there were getting lot of money at 4% annual interest rate. But they need to have competitive interest rate for saving account.

Important Note for Account Holders
The deregulation of saving account interest rate will get help little more interest than current 4% annual interest rate. But it does not mean you should keep lots of idle money in you bank account. You need to have plan to invest wisely to get better returns.You can consider liquid fund for short term and other options for long terms.

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