India Post savings A/C offering higher interest than that offered by its banking arm

India Post Payments Bank (IPPB) has cut the interest rate on savings bank (SB) deposits thrice since February, from 4 per cent to 2.75 per cent even as it parent, India Post, continues to hold the interest rate on its Post Office Savings Account (POSA) rock steady at 4 per cent.

This difference of 125 basis points between the interest rate offered by IPPB and India Post on the same product (an SB account) could make it difficult for the former to attract fresh deposits. One basis point is one-hundredth of a percentage point.

With the latest cut of 25 basis points from 3 per cent to 2.75 per cent with effect from May 1, IPPB’s SB interest rate is the same as that offered by State Bank of India, the country’s largest bank.

Before the latest cut, IPPB had reduced the SB rate twice — from 4 per cent to 3.50 per cent with effect from February 1, and from 3.50 per cent to 3 per cent with effect from April 1.

It may be pertinent to mention that day-end balances above Rs. 1 lakh in IPPB can be swept into linked POSAs with India Post.

What this means is that the interest rate on balances above Rs. 1 lakh will earn the higher interest rate of 4 per cent than those below Rs. 1 lakh.