Bank on rural reach; say loyal customers won’t shift for a little more interest.

If you thought your neighborhood bank branch offer more to your savings idle after deregulation in recent years, you may be disappointed.

Public sector banks, which have more than 70% of total bank deposits in the mood to raise interest rates, because they are convinced of their “loyal” customers do not desert, “a few basis points,” more. They are also wary of rising funding costs, which will put pressure on their interest margins.

Unaffordable ?

Bank Savings Deposits * Additional Burden*# Estimated % profit fall #

State Bank of India 4,09,609 4,096 20.57

Punjab National Bank 93,664 937 13.99

Bank of Baroda 66,096 661 11.21

Canara Bank 58,617 586 11.97

Union Bank of India 44,689 447 15.19

* in Rs Cr; # if the rate increase by 1%; deposits as on March 31st.

Source: SMC Global

State Bank of India, Punjab National Bank, Bank of Baroda, Bank of India, UCO Bank, Indian Overseas Bank, Syndicate Bank, Indian Bank, Dena Bank and Bank of Maharashtra are some of the public sector banks have told Business Standard that not “s are no immediate plans to raise the savings bank deposit rate.

SBI, after the creation of a committee to review the case, decided not to increase for now.

“The public sector banks are in no hurry to raise rates because the balance of savings accounts remains stable. We do not anticipate the migration of customers in number due to a difference in the rates. A couple of customers in metros can change banks but we have many branches in rural areas where no other bank is present, “said Krishna Kumar, General Manager, State Bank of India.

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The second largest lender Punjab National Bank, also said he was in no hurry to revise the rates. “The central bank has recently liberalized the rate of savings. We are waiting and watching what happens in the market. We have no hurry to revise the rates,” said president and executive director KR Kamath.According to RBI data, savings deposits in most households. Savings deposits constitute about 22% of total deposits of scheduled commercial banks and about 13% of financial savings in the household sector.

After the deregulation of the savings rate of bank deposits last month, some private sector banks, Yes Bank, IndusInd Bank, Kotak Mahindra Bank and Ratnakar Bank immediately increased the rate to boost its low-cost deposit franchise . Current account and savings account (Casa) deposits are the basis of low cost bank deposits. The banks with more deposits House enjoy a relatively low cost.

Several banks have attracted the interest rates of 4% savings in bank deposits. Increases in interest rates would be the pressure on costs and margins.

“We believe that there are four% is optimal, because the costs of servicing these accounts. Our assets and liabilities, the Committee believes that this is not the right time to increase the employment rate. When the interest rates for term deposits starts to decline, it is the right time to jack up the rate of deposit of savings, “said TM Bhasin, President and CEO, Indian Bank.

Bankers said that until the fixed deposit interest rates of moderate weather, they can not walk in the bank rate savings. “We have no intention to increase the speed. We will wait and see on the market. We prefer to term deposit rates to moderate the first. The current rate of 4% is pretty attractive,” said M Narendra, CMD , Indian Overseas Bank.

Lenders are also building government in its relations with long-standing customers as a mattress.

“Customers in this segment are less sensitive to the number. Many have relationships with us for decades. Some basic points, does not abandon us,” said MG Sanghvi, Vice President of Bank of Maharashtra.

Bankers said the savings deposit accounts are used primarily for trading purposes, not for the savings fund. Thus, customers may not be ready to move from one bank to another. “Customers can be issued post-dated checks or ECS on savings accounts. Nobody takes the trouble to move all these services from one bank to another,” said a senior official of a public sector bank.

Source: Business Standard

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Overnight Developments

• European stocks are weaker with the European DJ Stoxx 50 down -1.01% and Sep S&Ps down -4.20 points. The dollar and most commodities are lower while Treasuries and bunds are higher. European bank stocks are leading share prices lower with Raiffeisen International Bank Holding AG down 1.8% after the Austrian bank that operates in 17 former communist countries in eastern Europe reported Q2 net income of 71 million euros ($89.75 million), below analysts’ estimates of 99 million-euros. Eurobank Ergasias SA fell 3.1% as Greece’s second-largest lender said first-half profit fell after loan losses and taxes increased. Aug Euro-Zone inflation slowed to 1.6% y/y from 1.7% y/y in July, while the Aug Euro-Zone unemployment rate held at 10.0% for a fifth month, the highest in 12 years. In Germany, the number of people out of work declined -17,000 in Aug, its 14th consecutive month of declines, as the unemployment rate held steady at 7.6%. The German economy is leading Europe’s recovery as exports and investment surge, and may limit any slowdown in the Euro-Zone.
• The Asian markets today closed lower with Japan down -3.55%, Hong Kong -0.97%, China -0.41%, Taiwan -1.61%, Singapore -0.23%, South Korea -1.23%, India -0.34%. Asian stocks fell after slower-than-estimated growth in US personal income increased concern the economic recovery may falter. Japanese stocks tumbled despite an unexpected +0.3% m/m increase in Jul Japan industrial production and the larger-than-expected +0.7% m/m increase in Jul Japan retail sales. Stock prices in Japan remain under pressure on concern that the steps taken Monday by the BOJ and the government to halt the yen’s gain and boost economic growth will be insufficient. Q2 GDP in India expanded 8.8% annualized, its fastest pace in 2-1/2 years, which increases pressure on the Reserve Bank of India (RBI) to extend its recent string of interest rate hikes. The markets now expect another 25 bp rate hike by the RBI at its next meeting Sep 16 to cool inflation as India’s wholesale-price inflation has rem ained stubbornly around 10% since Jan.

Overnight U.S. Stock News

• Sep S&Ps this morning are down -4.20 points. The stock market yesterday opened lower and sold-off steadily the entire day and finished on its low (Dow -1.39%, S&P 500 -1.47%, Nasdaq Composite -1.56%). Bearish factors included (1) comments from the BOJ after its emergency meeting in which it expanded its bank loan program and said that "uncertainty" regarding the American economy is growing, (2) the weaker-than-expected Jul US personal income which fuels concern the economic rebound may slow further (+0.2% versus expectations of +0.3%), (3) the action by Morgan Stanley to cut its second-half GDP estimate for the US to between 2.0% and 2.5% from an earlier estimate of 3.0% to 3.5%, and (4) the action by Barclays Capital to reduce its year-end S&P 500 forecast to 1,120 from an earlier forecast of 1,220, saying "the market-implied probability of recession increases."
• Bullish factors included (1) carry-over strength from an early rally in European equities after Aug Euro-Zone economic confidence rose more-than-expected to its highest level in 2-1/2 years along with a rally in Asian shares after the BOJ expanded its bank-loan program, (2) the stronger-than-expected Jul US personal spending (+0.4% versus expectations of +0.3%), and (3) increased M&A activity after Sanofi-Aventis bid $18.5 billion for Genzyme, Intel agreed to buy Infineon Technologie’s wireless unit for $1.4 billion and 3M said it agreed to buy Cogent for $943 million.
• Ford Motor (F) slipped 2.1% in European trading on speculation that tomorrow’s US auto sales results will show that Aug sales this year were the slowest since 1982 as model-year closeout deals failed to entice customers.

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