YES Bank increases balance slabs for 7% interest on savings account

Private sector lender YES Bank has revised the balance slabs for offering 7% interest on savings account. In an official communication to its customers, the bank said that from April 1, 2015, an interest rate of 7% per annum will be applicable for those having Rs 3 lakh and above balance in their savings account, while an interest rate of 6% per annum will be applicable on balance below Rs 3 lakh.

At present, the bank offers a 7% interest rate on savings account with balance of Rs 1 lakh and above, while it was 6% per annum for balances below Rs 1 lakh.

Pralay Mondal, Senior Group President - Retail & Business Banking, YES Bank said, "Most banks have reduced rates. We are still most competitive in the market and have retained the 7% rates for those customers who have a higher balance of Rs 3 lakh or above. Even for balance below Rs 3 lakhs, we offer the most competitive rate of 6% to our customers."

In 2014, private sector lender IndusInd Bank was the first bank to reduce the interest rate on savings bank accounts, after it was deregulated by the Reserve Bank of India (RBI) in 2011. The lender was also among the few banks which started offering more on savings account when rates were freed.

IndusInd had cut the interest rate on savings account to 4.5% per annum against 5.5% per annum earlier for daily balance less than Rs 1 lakh. The reduction in interest rate came into effect from September 1, 2014. The bank had however maintained the rate of 6% per annum for daily balance equal to or greater than Rs 1 lakh. All the public sector banks and all large private banks offer four% on savings bank deposits.

The bank had raised the rate in October 2011 following deregulation of the savings bank interest rate. Some other banks like YES Bank and Kotak Mahindra Bank had also hiked the rate following the deregulation.

Later, Kotak Mahindra Bank had also said that with effect from November 1, 2014, the interest rate on daily balances up to Rs 1 lakh in savings accounts will be revised to 5% per annum. It had however said that daily balances over Rs 1 lakh will continue to earn 6% interest a year. Earlier the bank offered 5.5% on deposits up to Rs 1 lakh.

Similarly, from September 1, 2014, Lakshmi Vilas Bank had revised its interest rates to offer 5% per annum to those with savings bank account balance of Rs 1 lakh and above. Those with balance of below Rs 1 lakh would earn interest of 4%.

On March 4, 2015, RBI cut the repo rate by 25 basis points to 7.50%. With interest rate going down, it was expected that higher interest rate offered by banks on savings account would also go down.