India Post Payments Bank (IPPB) has cut the interest rate on savings bank (SB) deposit thrice since February 2020 from 4 per cent to 2.75 per cent even as it parent, India Post, continues to hold the interest rate on the Post Office Savings Account (POSA) rock steady at 4 per cent.
This differential of 125 basis points between the interest rate offered by IPPB and India Post (also known as Department of Posts) on the same product (SB account) could make it difficult for the former to attract fresh deposits. One basis point is equal to one-hundredth of percentage point.
With the latest cut of 25 basis points in the interest rate on SB accounts from 3 per cent to 2.75 per cent with effect from May 1, 2020, IPPB’s SB interest rate is the same as that offered by State Bank of India, country’s largest bank.
Before the latest cut, IPPB had reduced SB rate twice — from 4 per cent to 3.50 per cent with effect from February 1, 2020 and from 3.50 per cent to 3 per cent with effect from April 1, 2020.
It may be pertinent to mention that day end balances above Rs. 1 lakh in IPPB can be swept into linked POSA with India Post. What this means is that the interest rate on balances above Rs 1 lakh will earn higher interest rate of 4 per cent than those below Rs 1 lakh.
Meanwhile, Bruhaspati Samal, Odisha Circle Secretary, All India Postal Employees Union, in a letter to R N Parashar, Secretary General, National Federation of Postal Employees, said: “It has come to our notice that the Secretary (Posts) during Video Conference on 01.05.2020 has directed all HoCs (heads of circles) to ensure opening of salary account by the employee of DoP (both Departmental and Gramin Dak Sevak staff) with IPPB within a week.”