On Tuesday, the RBI  announced a hike of 0.5 % point in the savings deposit rate — the first increase in 19 years — taking it to 4% with immediate effect.

Savings bank accounts are the primary savings vehicle, almost by definition, of the least well-informed class of savers. As such, the only way these people have of maximising their returns is if the RBI  creates conditions that make easy that. A few months ago, RBI had forced banks to change the method of calculating the savings bank interest on the daily average balance instead of the minimum balance. This made the calculation fair and enhanced returns for customers.

Interestingly, after the RBI's draft on rates was released, some bankers seemed to propose that rates may actually come down because they claim that small accounts are uneconomic at even the current levels. My guess is that the banks will end up giving diverse interest rates to different categories of customers. Whether that achieves the RBI's goal remains to be seen.

Savings bank returns apart, banks products are the default 'investment' that a majority of Indians use, and it's a fact that bank's rules and regulations are not setup to maximise your returns. This means that if you are using fixed deposit as an investment vehicle—and a lot or people are—then you need to track their expiry carefully because lapsed fixed deposits are major source of leakage of returns. The ideal would be if the RBI would fix the underlying rules, but failing that, investors need to take care of their interest themselves.

Source: [Hindustan Times]