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Yes Bank Raises Savings Rate to 6%

Savings Rate deregulation – mentioned in the RBI policy statement – has claimed one winner at least.

Yes Bank raised its savings rate to 6%. This is 200 bps higher than the 4% other banks give you.

Yes Bank has had a stunning Q2, growing earnings 33% in the Sep 2011 quarter. Their CASA ratio is very low – just 10% as of June – and their savings deposits were just 817 cr. of the 45,000 cr. they had in total deposits on March 31, 2011. More than 30% of their financing is through corporate deposits, which will carry a price of over 10%, so this is good for the bank.

I’m looking to move my money over, so I’ve pinged them for information on starting an account. Let’s see where it goes.

  • That is great news!
    I had a question related to NRI accounts. Why do banks give savings rate of 6% on NRE accounts but the FD rate on those accounts is under 3%? Why would anyone create an FD when they can earn more in savings account?

  • mkd says:

    NRE a/c is completely repatriable (and non-taxable?), so I guess thats the reason they give lower rates to avoid carry trade.
    NRO, although almost equivalent to resident a/c still gets the inferior treatment. I guess there are some rules that allow repatriation of part of holdings in NRO a/c.
    Now only if there could have been a way to borrow in dollars and FD it in rupees and enjoy returns from interest rate and currency differential.

  • Dhruva says:

    You mentioned in earlier post you have account in HDFC, same as me. However I am not planning to switch over because I have their “savings max” account (which probably you have too) where anything above 1Lac gets sweeped over to FD – currently earning me 9% (also renewed every year automatically based on current interest rate – which you mentioned in earlier post how banks sucks little bit by changing FD durations – which I agree but don’t care much too.) Bottomline is I am “satisfied” with their service, I probably don’t expect too much out of them.
    2nd thing – whenver interest rate comes down, banks will drag savings rate also down – right? – so even you switch over to Yes Bank you may get higher returns now but will get much less returns (say 3%, not 6% when sanity resumes)
    Comments? Does it make sense to stick with HDFC?

    • I’ve been a customer of HDFC since 2000, but I think now most banks have the service capability they offer. I do nearly all my transactions online, through the credit card. I issue just rent cheques and pay building maintenance through cheques. I use the bank’s online facility to pay credit card bills and transfer money to/from my broker, or to buy/sell mutual funds.
      Since now every bank has this kind of facility, my savings bank money is simply a once-a-month requirement. I don’t like FDs – the sweep in values are too high, they now charge a pre-withdrawal penalty (even for sweep outs) and hten you have to ermember to track’em.
      Given this, I am satisfied with them, but then I think I would be satisfied with other banks as well. My average balance in a bank is marginally above Rs. 1 lakh so an excess will give me about Rs. 2,000 per year – post taxes maybe Rs. 1,500 – which is good money, honestly, for service that seems to be par for the course. I’ts a good dinner somewhere.
      I can’t move my SB account completely – it’s linked to my trading accounts and so on. But I can move most of the balances so that I make the big payments from a different account.

  • bemoneyaware says:

    It’s a very competitive market so all the banks would be forced to raise their rates. Yes Bank just started the trend others bank will follow suit. I also have an account in HDFC Bank. I shall wait and watch before deciding. Just wondering how the banks would compensate for rise in interest rate (extra charges where..)?

  • Arghya says:

    @Deepak, well said… … some money for a good dinner finance by extra interest income.
    I also do agree they charge something for sweep-out form FD to saving account. My main account is with ICICI where they have a linked-FD option. They do deduct charges which are very difficult to track.
    By the way, as here we all are Capital-Minded  people we should also be aware about the underlying risks. One major risk regarding Linked-FD is – If someone get access to your ATM and PIN or some unfortunate incident happen to you where you are asked to withdraw money at the gunpoint (which is not a rare event now-a-days. you would find such kind of incident on newspaper once in a month) you would not only loose savings but also FD. This is a huge risk.
    As bank deducts hefty penalty on prepayment withdraw even on FD linked to saving account, there is no significant benefits of making an auto-sweep FD, moreover you carrying the risk I just mentioned.
    A better money management schedule would be the best option. And thanks to credit cards, saving account outflows dates are more predictable (even if you incur some unexpected expense). So use the payment schedule of credit cards judiciously.
    Anyway I am not going to create one more account, (already too many of them – ICICI, SBI, HDFC, DB, Axix, OBC…. Ohhh hoo enough. no more ). I would expect ICICI, HDFC to increase their saving deposit rate (at least to 5%) and wait.
    But hay, there is no free lunch; I am expecting pretty soon all banks would start charging for saving account (or would increase minimum balance) which is free till date. Be careful, US-Europe saving account get very little on their balance.

  • Rajan Chandolia says:

    Don’t quite agree with u Arghya…i believe we need to overhaul our banking account system. As we use saving account like a current account i.e. using it for day today expenses. I suggest we keep savings account free with increased interest rates but with some restrictions like :
    (1) Minimum number of withdrawals
    (2) No ATM card facility
    Thanks,
    Rajan