Liberalising Savings Bank Deposit Rates

While a considered view needs to be taken on deregulation of all interest rates on small savings, a reform that need not wait and that is simpler to implement is freeing of interest rates on savings bank deposits. While SBDS are operative in many countries, the way in which these accounts are worked in India makes them more akin to checking or chequable accounts abroad. Although meant to inculcate the savings habit, SBDS are now held by a variety of individuals, including high net worth individuals, and also by organisations in the government, financial and non-financial sectors. To be a true small savings account the cheque writing facility of these accounts has to be withdrawn. As in other countries, SBDS could offer minimum facilities such as withdrawal and ATM/debit card with modest interest payment. The SBDS may in principle be treated similar to "no frills" accounts and the interest rate on them freed.