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Back to savings

Investment is likely to take a back seat compared with deposits and savings as banks focus once more on the basics.

Amidst the gloom, there’s some good news: you’re unlikely to be inundated with calls offering ‘free’ loans or credit cards. The better news: banks are spending time and money to educate customers. The focus is on wealth preservation, with banks as custodians.

What wealth preservation can you hope for when the bank offers a 10% return on a 500-day deposit? Chances are that the rate might fall to about 7.5% after some time. In 2009, the question is not if, but when, interest rates will fall. While locking in deposits at current rates is a good idea, try not to put all your money in one bank if you have more than Rs 1 lakh to invest. Deposits of up to Rs 1 lakh in all banks are insured by the Deposit Insurance Credit Guarantee Corporation. So even if the bank goes bust, your money is safe.

2009

• There will be online inter-linking of accounts across banks.

• ECS (free till 31 March 2009) may incur a service charge.

• Annual fee on debit cards will go up.

• Inter-bank ATM usage will be free.

• Biometric identification will ramp up security in the banking space.

Banks will also try to create innovative fixed deposit schemes, paying attractive monthly interest, which can be routed to an index fund or any other form of low-risk investment. There is also the possibility of deposits backed by additional terminal benefits.

Even though banks will focus on staid deposits, they will continue to function as financial superstores, offering everything from insurance to mutual funds. 2009 is likely to see more seamless transactions across these arms and more live updates. Online banking customers could transact and manage multiple accounts across multiple banks through a single window. This will give them more flexibility and convenience to manage funds.

On the service front, banks will look for easier ways to address grievances and queries. There will be new charges levied on services that you have grown accustomed to, so remember to go through all communications from your bank. Most importantly, the banks’ role of a credit provider in capital markets may take a beating. Will this improve their customer focus? We should get the answer next year.