Kotak Mahindra Bank has raised interest rates on deposits, making it the second bank to hike rates after the Reserve Bank of India (RBI) deregulated savings deposit rates, a decision that is expected to cheer the average depositor.
The bank revised the savings bank interest rate for deposits above Rs1 lakh to 6 per cent per annum and for upto Rs1 lakh to 5.50 per cent per annum.
Prior to the revision, the bank's savings interest rate was 4 percent per annum, Kotak Mahindra Bank said in a statement on Sunday.
It also raised the base rate by 25 basis points to 10 per cent per annum, effective 1 November 2011, from the present 9.75 per cent per annum. The bank also raised prime lending rates by 25 basis points to 8.75 per cent.
Earlier on Tuesday, immediately after RBI deregulated savings deposit rates, private sector lender Yes Bank raised savings deposit rate for all savings accounts by 200 basis points to 6 per cent.
The bank also raised base rate by 25 basis points to 10.5 percent with immediate effect, it said in a press statement.
Industry analysts now expect other banks to follow suit and hike savings, with most of them expected to make announcements during this week.
The hike in repo and reverse repo rates announced by the central bank would also result in banks hiking their interest rates, which would lead to an increase in borrowing costs, they said.