What might be the reason for continued competition in Savings Bank interest rates? There can be a 'technical' view in terms of the liquidity situation and the competitive demand for funds in the market. But there can also be a 'fundamental' view for arriving at the interest rate. This should depend on the behavioural maturity of savings bank balances. What are the maturity buckets within which a cohort of SB customers may be expected to demand repayment? The relationship value of the account to the bank would also be important. I am sure banks must have aggregated data on the behavioural maturity of savings accounts. Is this aggregated by RBI and available in the public domain?.
Also, with all major banks now offering sweep-out and sweep-in products funds can be placed in appropriate interest carrying maturity buckets to suit the depositor's requirements. If this facility is given to more customers, interest on savings bank accounts with cheque books can be abolished altogether.The minimum balance can meet the cost of the bank's services.