Banks could feel the pinch if the Reserve Bank of India directs them to credit interest into savings bank accounts at quarterly or shorter intervals, say bankers.

Reeling as they are under the double whammy of having to pay interest on a daily product basis and the recent 50 basis points hike in SB deposit rate to 4 per cent, bankers say they are already giving enough freebies to customer in the form of five free transactions every month at other bank ATMs and free remittances.

“We have to recover the cost of investment in technology. If we are asked to credit interest at quarterly or shorter intervals into savings bank deposits our cost of funds will go up further. We will then be forced to withdraw some of the freebies,” said a top banker who attended the customary post-policy review meeting in the RBI on Thursday.

Guidelines of provision for pension

The RBI has asked the Indian Banks' Association to draw up comprehensive guidelines on provision for pensions so that banks make approximate provision for future liabilities at regular intervals and are not caught off-guard, said Mr K. Unnikrishnan, Deputy Chief Executive, IBA.

Profitability of some public sector banks was dragged down in FY11 as the RBI disallowed them to amortise their pension liability towards retired employees who recently opted for pension.

Basel III

The central bank will be conducting an impact analysis arising out of implementation of the Basel III (global regulatory standard for bank capital adequacy and liquidity) framework in 10 large banks, including State Bank of India, ICICI Bank, Punjab National Bank, and Canara Bank.

Branches in un-banked areas

The RBI will soon be releasing guidelines whereby banks are required to open 25 per cent of their new branches in Tier-V and VI centres.

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