Yes Bank hikes savings account rates to 7%

Non-government lender Yes Bank today raised its savings deposit rates to 7 per cent from 6 per cent.

It also raised non-resident Indian savings account deposit rate by 200 basis points to 6 per cent for deposits of up to Rs1 lakh and by 300 basis points to 7 per cent for balances of over Rs1 lakh.

The rate hikes are with immediate effect, the bank announced in a statement.

"In the light of the current volatile global economic situation, we believe that the new Yes Bank deposit rates will be an attractive source of returns for our customers," Yes Bank managing director and chief executive Rana Kapoor said in the statement.

Yes Bank was incidentally the first bank to take advantage of the Reserve Bank of India's move to deregulate savings interest rates, its last administered bank rates, when it raised rates for all savings accounts by 200 basis points on 25 October.

Soon after the RBI announcement, Yes Bank had raised saving deposit rate by two percentage points to 6 per cent.

Observers point out that RBI's deregulation of rates has provided a boost to smaller lenders, which moved quickly to raise rates.

Savings deposits are a source of low-cost funds for banks, making up about 22 per cent of their total deposit base. Larger banks have traditionally dominated the sector, which accounts for about 13 per cent of household savings.