Banks want RBI to reduce deposit rates.

Indian bankers on Thursday asked the Reserve Bank of India to reduce the savings bank deposit rates to protect their margins.

In a post-monetary policy review meeting with Reserve Bank of India Deputy Governor Usha Thorat, bankers said their cost of deposits would rise by around 80 basis points due to the new way of calculating the savings bank deposit rate.

The rate is calculated on the daily average balance method.

"We requested them to either reduce the savings bank rate or postpone the implementation. It will affect our margins and profit," said MV Nair, chairman and managing director, Union Bank of India, after the meeting.

The RBI has asked all the banks to offer interest to savings bank customers on a daily basis from April 1, which is 3.5 per cent.

Currently, the return on savings bank is determined on the basis of the minimum balance on the eleventh day to the last day of the month.

This system of calculation resulted in customers getting 2.5 per cent on their savings deposit.

"We suggested that the savings bank rate be reduced to 2.5 per cent from 3.5 per cent now. They said they will examine it," said another banker who attended the meeting.

Nair, who is also the chairman of Indian Banks' Association, said there was a possibility of home loan rates being higher compared to the pre-crisis level after the new base rate.

"I think on an average, base rate could be 8.5-9.0 per cent. There is a point there. If we add the risk premium, tenure premium, then home loan could be higher," Nair said.

Banks had launched special home loans at 8 percent in late 2008 to protect a sharp slowdown in credit growth. These loans were made fixed at 8 per cent for the first three years and thereafter to be linked to the benchmark prime lending rate.

Most of these plans are slated to end in March.