Immediately after the Reserve Bank of India (RBI) de-regulated savings rate, private sector lender Yes Bank

was the first one to hike its savings deposit rate by 200 basis points to 6%. Peers Kotak Mahindra Bank and IndusInd Bankjoined the bandwagon in the next two days. So, are you planning to shift your savings account? Consider this: No doubt de-regulation of savings rate will earn you some extra bucks on account of interest rates. However, you need to take care of some other factors as well. Prior to the deregulation, banks across the board, were offering uniform 4% (p.a) rate of interest on savings deposits. A little higher rate of interest does not necessarily prompt a shift, said Brijesh Damodaran, founder of Zeus Wealthways, a financial advisory firm. Breaking a long standing relation with your existing bank is not easy. Over a period of time, you enjoy a lot of comfort level in dealing with your bank officials. You also get accustomed with banks way of operations. Unless you have huge balance, maybe over and above Rs 10 lakh, it does not make sense to shift your savings account to a new bank offering higher rate of interest. A greater savings account balance will fetch a depositor higher interest income. In personal finance parlance, savings account money is termed as idle money. Ideally, savers should keep money equal to their 3-6 months expenditure, in their savings accounts. Clients normally do not change their savings bank account only on higher rate. There are many other factors that help in customer retention. Those are loyalty, customer service and comfort level in dealing with the banks officials. We are not jumping into rate hikes like some of the banks have done, said Abraham Chacko, executive director, Federal Bank , a private sector lender. If a depositor is having multiple transaction links with his existing bank, a shift of savings bank account is not advisable. For example, if your demat account is liked to your savings and a change to a new bank will add to inconvenience. You may end up paying more transaction costs as well. Banks Savings Rate (%) Yes Bank 6 Kotak Mahindra Bank 6 IndusInd Bank 5.5 - 6 What if, you are a new customer? There is no rationality for shifting your savings account on higher interest rate, said Sumeet Vaid, CEO and founder, Freedom Financial Planners. You have to see the convenience of banking in a particular bank. If a bank offers good service facilities, a new customer should go for it instead of looking at minimal rise in savings rate. There has to be a fine line between savings and investment. Do not expect good returns not from savings, but from your investment. Banks perspective Banks especially the smaller ones with lower share of current account and savings account (to total deposits) tend to plunge into rate hike war to grab market share. Yes Banks CASA

ratio stood at just 11% with CASA base at Rs 4,839 crore out of total deposits of Rs 44,076 crore. Big banks may not hike rates soon as they have higher share of CASA, which will lead to increase in cost of borrowings. A 100 basis point rise in savings deposit rate would put a margin pressure of 22-25 basis points. If we go for a savings rate hike, we have to either bring down bulk deposit rates or hike lending rates to off-set the margin impact, M Narendra, CMD, India Overseas Bank told Moneycontrol.com. Does de-regulation mean only upward revision of rates? Certainly not! Global experience shows, savings rates have actually come down after deregulations. Here in India too, rates can come down. There could be downward revision of savings rate as well.Accounts with less than Rs 1 lakh balance, are seen more of transaction accounts while accounts with more than Rs 1 lakh will be viewed as fixed deposits. In case of the former, rates may come down said Ananda Bhoumik, senior director, Fitch Ratings.