For long, the regulated savings bank (SB) interest rate remained downward sticky even when the market conditions were favourable for an increase. This could be attributed, among other reasons, to commercial banks’ prevail in convincing the Reserve Bank of India (RBI) on its excessive cost in maintaining such accounts.
However, with the advent of technology in servicing the account (like ATM, NEFT, Core Banking Solutions, Net-Banking, Inter-Bank Mobile Payment Service, etc.), the cost to serve, for the providers, has drastically reduced.
This fact never got discounted appropriately while arriving at the SB interest rate or even the service fees. As a consequence banks gained considerably (net profit of scheduled commercial banks for 2009-10 being 57,109 crore) through unwarranted high net interest margins and service fees and commissions.