A host of small finance banks and universal banks that have launched operations are offering almost 2-3.35 per cent higher interest rate on savings accounts and up to 2 per cent more on fixed deposits. Two micro finance companies, Suryoday and Utkarsh, began operating as small finance banks this week. Suryoday has opened its first branch in Navi Mumbai and it is offering highest interest rate of 9 per cent for 1-2 year deposits. This is much higher than other commercial banks that are offering 6-7 per cent.
For senior citizens, Suryoday is offering 9.75 per cent, 75 basis points higher than normal rates offered by established banks that usually pay around 50 basis points higher than normal rates. On savings deposits, the bank is paying in the range of 6.25-7.25 per cent (payable monthly as compared to quarterly for most of the other banks).
Similarly, Utkarsh Small Finance Bank is offering deposit rates that are 1-1.25 per cent higher than other banks as it targets to achieve 23 lakh customer base under its liability books by March 2018.
Newly launched private sector banks IDFC Bank and Bandhan Bank too are offering higher interest rates on fixed deposits and savings accounts.
On the other hand, the country largest lender State Bank of India (SBI) is offering a 6.90-6.95 per cent on fixed deposits of 1-2 years while private lender ICICI Bank is offering 6.90-7 per cent, HDFC Bank is offering 6.25 to 6.95 per cent.
So, should you take the bait? “These rates are just invitation rates and may not be sustainable over the long-term. So, if an individual has surplus cash, he can look at locking a small portion of their investments for a smaller tenure of 1-2 years. And only once a complete picture on their performance and track record emerges, he can look at increasing the allocation to their fixed deposits,” said Suresh Sadagopan, a certified financial planner.
“Don’t look at just interest rates but look at the credit rating of a small finance bank before putting your money in their fixed depo?sits. Since they have just launched, they come with a risk and thirdly fixed depo?sits are taxable and therefore one should look at better inv?estment avenues such as MFs,” said Pankaaj Maalde, a certified financial planner.
Parag Jariwala, vice-president, institutional research, banking and financial services, Religare Capital Markets, said, “Small finance banks and payment banks are too small to offer any direct competition to small-mid size fast gr?owing private sector banks. In addition, a few large HNI customers, cash-rich companies (for bulk deposits) may go with a bank having well-established track record.”
For senior citizens, Suryoday is offering 9.75 per cent, 75 basis points higher than normal rates offered by established banks that usually pay around 50 basis points higher than normal rates. On savings deposits, the bank is paying in the range of 6.25-7.25 per cent (payable monthly as compared to quarterly for most of the other banks).
Similarly, Utkarsh Small Finance Bank is offering deposit rates that are 1-1.25 per cent higher than other banks as it targets to achieve 23 lakh customer base under its liability books by March 2018.
Newly launched private sector banks IDFC Bank and Bandhan Bank too are offering higher interest rates on fixed deposits and savings accounts.
On the other hand, the country largest lender State Bank of India (SBI) is offering a 6.90-6.95 per cent on fixed deposits of 1-2 years while private lender ICICI Bank is offering 6.90-7 per cent, HDFC Bank is offering 6.25 to 6.95 per cent.
So, should you take the bait? “These rates are just invitation rates and may not be sustainable over the long-term. So, if an individual has surplus cash, he can look at locking a small portion of their investments for a smaller tenure of 1-2 years. And only once a complete picture on their performance and track record emerges, he can look at increasing the allocation to their fixed deposits,” said Suresh Sadagopan, a certified financial planner.
“Don’t look at just interest rates but look at the credit rating of a small finance bank before putting your money in their fixed depo?sits. Since they have just launched, they come with a risk and thirdly fixed depo?sits are taxable and therefore one should look at better inv?estment avenues such as MFs,” said Pankaaj Maalde, a certified financial planner.
Parag Jariwala, vice-president, institutional research, banking and financial services, Religare Capital Markets, said, “Small finance banks and payment banks are too small to offer any direct competition to small-mid size fast gr?owing private sector banks. In addition, a few large HNI customers, cash-rich companies (for bulk deposits) may go with a bank having well-established track record.”
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