Daily interst computation to have marginal impact on bank deposit costs: CRISIL

While savings-account holders will benefit from the adoption of the daily average method of computing intersts on deposits as proposed by the Reserve Bank of India, the cost of deposits for banks will increase by10-20 basis points.

According to rating agency CRISIL, the cost of deposits for banks will increase by10-20 basis points (bps; 100 bps = 1 per cent), depending on the share and pattern of the current and savings accounts (CASA) in their deposit base.

However, this will not materially impact their profitability or lead to any significant change in the share of low-cost deposits, or CASA in the banking system, CRISIKL believes.

RBI has proposed that all scheduled commercial banks start the computation of monthly interest on savings accounts on a daily basis with effect from 1 April 2010, instead of the current method of linking the interest to the minimum balance between the 10th and last day of each month.

CRISIL believes that the new method of interest computation will increase the effective interest rate on savingsbalances, particularly for salary account holders.

"It is estimated that for a salary account holder with aminimum savings balance between one - two times of the monthly salary, the increase in interest income will be between 10 and 25 per cent," the agency said in a statement.