Will Coronavirus take a toll on Savings Account interest rates

As the country went under lockdown due to the outbreak of the Coronavirus, it could have harsh effects on consumer banking solutions. Do you have a Savings Account? Then read further to know how the deadly virus could affect the interest rate.

Since the last few months, the world has witnessed a lot of unfortunate deaths due to the novel COVID-19. With its origination in Wuhan, China, the ongoing pandemic has compelled several countries like the US, Italy, France, Germany, Russia, etc. to go under lockdown. The pandemic has brought the most significant economies to a standstill.

The outbreak of Coronavirus is presenting fresh challenges to our country’s economy. India is trying to reign in the situation to contain the spread of the virus.As expected, the pandemic is aggravating the difficulties for the Indian banks.

In the view of the crisis, here are some of the changes that the Reserve Bank of India has announced:

• The Reserve Bank of India has cut repo rate by 75 bps to 4.4%
• The bank has also reduced the reverse repo rate by 90 bps to 4%.

Let’s understand how the repo rate could affect your savings interest rates.

Repo rate is the interest rate at which the RBI lends money to commercial banks. A drop in repo rate enables other banks to borrow money from RBI at low-interest rates. It is beneficial for consumers as they can avail of loan by paying less interest rate, which in turn lowers the cost of your loan. However, the low-interest rate would be disadvantageous for deposit accounts like savings.

Key highlights

• Following the RBI’s repo rate reduction, the Government of India has announced interest rate reduction for small schemes for the quarter Apr-Jun FY2021
• For a Savings Account, the interest rate remains unchanged at 3.25% per annum
• Popular saving schemes like Kisan Vikas Patra (KVP), Public Provident Fund (PPF), National Savings Certificate (NSC) and others will operate on low-interest rates.
• The PPF rate has dropped by 80 points to 7.1%, while the interest rate for NSC has reduced from 7.9% to 6.8% and KVP rate stands at 6.9% as against 7.6% per annum
• For Senior Citizen Savings Scheme, the interest rate is reduced from 8.6% to 7.4% per annum
• For FDs with a term period of 1 to 5 years, the interest rate stands at 5.5% -6.7% per annum
• For five-year RDs, the interest rate has dropped to 5.8% from 7.2% per annum

In the wake of the crisis that has called for the rate cuts, India’s leading banks like ICICI Bank has also slashed the interest rate on Savings Account to3.25% per annum from 3.5% per annum for Savings Account below Rs50 lakh. For account balance above Rs50 lakh, the interest rate is reduced to 3.75% from the earlier 4%. The interest rates are applicable from Apr 09, 2020.

Indian markets are now volatile, but in the past markets have always bounced back. In the past whenever there has been a setback, the country has been able to recover from economic recession. So, do not panic and keep depositing in your account without any worry. You should avoid making decisions that could hamper your savings severely.

Open your Savings Account now to get better benefits.

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