Switching banks? Not a healthy Step


Bangalore: As the Reserve Bank of India deregulated savings bank interest rate in October, banks like Kotak Mahindra, YES and IndusInd started offering elevated returns on savings account. Prior to this, banks were authorized to offer 4 percent on savings deposits.

"It's the senior citizens who take note of the interest rate differential first. The new generation, which has more than one account and access to electronic channels like internet to get information and compare products, is the first to move," said Rana Kapoor, Managing Director and CEO of YES Bank.

KVS Manian, President, Consumer Banking at Kotak Mahindra Bank said, "New customers belong to various segments - corporate salary accounts, small-scale enterprises, self-employed professionals and salaried individuals." He further added, "The response to the hike in our savings bank rate has been reasonably good, both in terms of new customers and our existing customers. Ever since we increased our rates to 6 percent on domestic savings deposits, our rate of acquisition has been hovering at around 80 percent."

The CASA (current account and savings account) deposits of these banks recorded a considerable growth in December 2011. For example, CASA for YES Bank stood at 5, 913.5 crore at the end of December 2011, in comparison to 4, 838.8 crore in the previous quarter. Likewise, CASA for Kotak Mahindra Bank rose from 9, 355 crore as of September 2011 to 10, 615 crore in the December quarter.

At the moment, advanced returns work as a massive incentive for customers to change banks. on the other hand, should it be the only reason? Not all the time, say financial planners, even if it is a significant factor. Listed are few aspects you need to take into account before taking the call: