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In India, the interest rate on savings accounts in all the nationalized commercial banks is fixed by
[2010]
- a)Union Ministry of Finance
- b)Union Finance Commission
- c)Indian Banks’ Association
- d)None of the above
Correct answer is option 'D'. Can you explain this answer?
Most Upvoted Answer
In India, the interest rate on savings accounts in all the nationalize...
Understanding Interest Rates on Savings Accounts in India
In India, the interest rates on savings accounts offered by nationalized commercial banks are not fixed by any single government entity or association. Instead, these rates are determined by the banks themselves based on several market conditions and regulations.
Key Points on Interest Rate Determination
- Market-Driven Rates:
Banks have the autonomy to set their own interest rates on savings accounts, which allows them to compete in the financial market. This competition can lead to variations in rates among different banks.
- Regulatory Framework:
While banks set their own rates, they must comply with guidelines from the Reserve Bank of India (RBI), which governs the banking sector. The RBI provides a framework but does not fix the rates directly.
- Economic Factors:
Interest rates can be influenced by broader economic conditions, including inflation rates, monetary policy, and the overall demand for loans. Banks adjust their savings rates to maintain a balance between attracting deposits and managing their lending rates.
- Financial Inclusion:
Initiatives aimed at increasing financial inclusion may also impact how banks set their savings rates, as institutions may offer more attractive rates to draw in customers from underserved populations.
Conclusion
Given the above points, the correct answer to the question is option 'D' - "None of the above." The interest rates on savings accounts in nationalized commercial banks are determined by the banks themselves, influenced by the market and regulatory environment rather than a specific government body or association.
In India, the interest rates on savings accounts offered by nationalized commercial banks are not fixed by any single government entity or association. Instead, these rates are determined by the banks themselves based on several market conditions and regulations.
Key Points on Interest Rate Determination
- Market-Driven Rates:
Banks have the autonomy to set their own interest rates on savings accounts, which allows them to compete in the financial market. This competition can lead to variations in rates among different banks.
- Regulatory Framework:
While banks set their own rates, they must comply with guidelines from the Reserve Bank of India (RBI), which governs the banking sector. The RBI provides a framework but does not fix the rates directly.
- Economic Factors:
Interest rates can be influenced by broader economic conditions, including inflation rates, monetary policy, and the overall demand for loans. Banks adjust their savings rates to maintain a balance between attracting deposits and managing their lending rates.
- Financial Inclusion:
Initiatives aimed at increasing financial inclusion may also impact how banks set their savings rates, as institutions may offer more attractive rates to draw in customers from underserved populations.
Conclusion
Given the above points, the correct answer to the question is option 'D' - "None of the above." The interest rates on savings accounts in nationalized commercial banks are determined by the banks themselves, influenced by the market and regulatory environment rather than a specific government body or association.
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Community Answer
In India, the interest rate on savings accounts in all the nationalize...
It is fixed by Reserve Bank of India. In 2011, RBI permitted the commercial banks to fix interest rate on saving account independently.
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