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Poornima Mohandas

MUMBAI, June 28

DIFFERENT strokes for different folks, they say. Banking is soon to live up to it.

The interest rates on fixed deposits, loans, savings bank accounts and other banking services could vary in the future if you bank through the Net or phone as against coming to the branch, says Mr Hemant Kaul, Senior Vice-President, Retail Banking, UTI Bank. That too, in consumer's favour, mind you.

Private banks are conceptualising deposits with differential interest rates depending on the channel used by the consumer. The channel used is a new emerging criterion for differentiating consumer segments, courtesy technology.

Until now even regulations for interest rates have been formulated only with two criteria in mind - - amount and maturity of the deposit, the channel used by the consumer was taken for granted. This may change, avers another private bank official.

"As of today, these are concepts floating around in the sphere of Indian private banking. It will take time before the concept can materialise. At present, the Reserve Bank of India does not permit banks to alter interest rates based on the channel used by the consumer," says Mr Kaul.

According to the RBI regulations, there can be no discrimination of consumers based on the channel used by them. Now, there is a fixed interest rate on savings bank accounts and no interest is permitted on current accounts.

The interest rates on fixed deposits and loans can be varied, based on the amount.

An incentive through interest rates would reduce the number of customers visiting bank branches.

This is expected to bring down the bank's servicing cost. "As and when the RBI permits it, we would certainly offer differential interest rates," says a senior IDBI Bank official.

What is the rationale behind offering higher interest rates on deposits via the Net channel? While a typical physical transaction at a bank branch costs around Rs 100-104 to the bank, the same thing carried out through the phone would cost only around Rs 15 and when done online a mere Rs 1-2, explains a banker.

"Banks could price their services differently depending on the costs involved. It makes sense from the bank's business point of view to pass on benefits to their customers and thus increase their business," says an Indian Banks' Association official.

"But the question is whether the RBI will permit it ," he added.

Some foreign banks charge a fee if a customer visits the branch for a service that can be done through alternative channels.

This functions as a disincentive for customers doing physical transactions.

HDFC Bank, in fact, has introduced a month-long scheme for its Net banking customers, offering car loans at a lower interest rate than the regular rate.

Bankers see scope for many such incentives to encourage customers to use alternative channels.

"With time, we could soon be seeing customised services for individuals based on their credit history," says UTI Bank's Mr Kaul.

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