State Bank Of India

State Bank of India, the country's biggest lender, expects its average funding cost for savings bank accounts to rise 100-125 basis points. The deregulation of the rate is expected to spark off competition among banks to garner low-cost deposits. New banks, like YES Bank and Kotak Mahindra Bank are expected to be more aggressive in mopping up such deposits. Savings bank deposits comprise about 34 per cent of SBI's total deposit base. Of the bank's total savings deposits, 30 per cent have a balance of more than Rs 100,000.

The central bank, while deregulating the rate, did not put a floor on the savings rate or restrict the number of times banks may change the rate. It does require that each bank offer a uniform interest rate on savings deposits up to Rs 100,000.