While State Bank of India (SBI) raised the fixed deposit (FD) interest rates on May 28 this year to 6.65 per cent for the one-year tenure, the FD interest rate offered by Fincare Small Finance Bank is 8.75 per cent. Similarly, AU Small Finance Bank offers 7.15 percent interest rate on the FDs, while Equitas Small Finance Bank offers 7.5 per cent per annum interest rate on its FDs.
The earning differential between the big commercial banks and small finance banks is not restricted only to the one-year long FDs, but extends to the FDs of all tenores. For instance, a three-year fixed deposit of SBI offers 6.7 percent per annum, while fincare and AU Small Finance Banks offer 8 per cent and 7.3 percent, respectively. Ujjivan Small Finance Bank, at the same time, offers relatively lower FD rate of 7 per cent but even that is also higher than the SBI's FD interest rate by 30 basis points.
Similarly, small tenure FD rates of small finance banks outpace that of State Bank of India. Sample this. The six-month FD rate of SBI is 6.35 per cent, while Ujjivan small finance bank pays 7.5 per cent to its depositors, AU small finance bank pays 7 per cent and Equitas Small Finance Bank pays 6.5 per cent.
The top bosses of these banks say the main reason for higher FD interest rates of small finance banks is that the FD customers comprise vital segment for them, unlike the banking behemoths for whom the current account customers and corporate customers are relatively more important.
Rajeev Yadav, managing director and CEO, Fincare said, "FD customers are an important and primary target segment for small finance banks, therefore, these banks offer superior customer service levels to FD customers. Larger banks are focused more of current and savings accounts, and do not promote FDs."
One might wonder as to the possibility of higher risk one would have to run to be able to earn a higher interest rate on FDs. However, the small finance bank leaders assert that by virtue of coming under the same regulator, Reserve Bank of India, these banks don't have relatively higher risk in comparison to other banks such as Bank of India, State Bank of India (SBI) and others.
State Bank of India's (SBI) Fixed Deposit (FD) interest rates
|Tenors||Existing for Public w.e.f. 28.03.2018||Revised For Public w.e.f. 28.05.2018||Existing for Senior Citizens w.e.f. 28.03.2018||Revised for Senior Citizens w.e.f. 28.05.2018|
|7 days to 45 days||5.75||5.75||6.25||6.25|
|46 days to 179 days||6.25||6.25||6.75||6.75|
|180 days to 210 days||6.35||6.35||6.85||6.85|
|211 days to less than 1 year||6.4||6.4||6.9||6.9|
|1 year to less than 2 year||6.4||6.65||6.9||7.15|
|2 years to less than 3 years||6.6||6.65||7.1||7.15|
|3 years to less than 5 years||6.7||6.7||7.2||7.2|
|5 years and up to 10 years||6.75||6.75||7.25||7.25|
Fincare Small Finance Bank's Fixed Deposit (FD) interest rates
|Tenure||General Public||Senior Citizens**|
|7 days to 45 days||4.00%||4.50%|
|46 days to 90 days||4.00%||4.50%|
|91 days to 180 days||6.00%||6.50%|
|181 days to 364 days||7.00%||7.50%|
|12 months to 15 months||8.00%||8.50%|
|15 months 1 day to 18 months||8.25%||8.75%|
|18 months 1 day to 21 months||8.50%||9.00%|
|21 months 1 day to 24 months||8.75%||9.25%|
|24 months 1 day to 36 months||9.00%||9.50%|
|3 years 1 day to 5 years||8.00%||8.50%|
|5 years 1 day to 7 years||7.00%||7.50%|
|5 years 1 day to 7 years||7.00%||7.50%|
Fincare's Mr Yadav elaborates as to why small finance banks don't pose any special risk for the depositors.
"Small finance banks come under the regulatory purview of the RBI (Reserve Bank of India). All compliance, governance and reporting requirements that apply to universal banks, such as risk based supervision, Cash reserve ratio/SLR (statutory liquidity ratio) requirements, apply to small finance banks as well," said Mr Yadav.
He further said, "The small finance banks are required to maintain a capital adequacy ratio (CRAR) of 15 per cent, higher than the 9 per cent requirement for private and public sector banks. Having said this, most of the SFBs voluntarily maintain CRAR in the 20-30 percent range, significantly lowering the risk of any investors."
AU Small Finance Bank Fixed Deposit (FD) interest rates
|TENURE BUCKETS||Interest Rate / Card Rate p.a. (%)||Senior Citizen Interest Rate p.a. (%)||For NRE*/NRO Interest Rate p.a. (%)|
|7 Days to 1 Month 15 Days||5.50%||6.00%||5.50%|
|1 Month 16 Days to 3 Months||6.75%||7.25%||6.75%|
|3 Months 1 Day to 6 Months||6.90%||7.40%||6.90%|
|6 Months 1 Day to 12 Months||7.00%||7.50%||7.00%|
|12 Months 1 Day to 18 Months||7.15%||7.65%||7.15%|
|18 Months 1 Day to 24 Months||7.15%||7.65%||7.15%|
|24 Months 1 Day to 36 Months||7.25%||7.75%||7.25%|
|36 Months 1 Day to 45 Months||7.30%||7.80%||7.30%|
|45 Months 1 Day to 60 Months||7.40%||7.90%||7.40%|
|Above 60 Months*||7.25%||7.75%||7.25%|
Equitas Small Finance Bank Fixed Deposit (FD) Interest rates
|7 - 14 days||5.00%|
|15 - 29 days||5.50%|
|30 - 45 days||6.00%|
|46 - 62 days||6.25%|
|63 - 90 days||6.25%|
|91 - 120 days||6.50%|
|121 - 180 days||6.50%|
|181 - 210 days||6.75%|
|211 - 270 days||6.75%|
|271 - 364 days||7.00%|
|1 year to 18 months||7.50%|
|18 months 1 day to 2 year||7.75%|
|2 years 1 day to 3 years||7.75%|
|3 years 1 day to 4 years||7.00%|
|4 years 1 day to 5 years||7.00%|
|5 years 1 day to 10 years||7.00%|
One can even open an FD with a small finance bank online. While explaining this, Mr Yadav said, "With the focus on technology and digital operations, customers of some of the SFBs can open accounts instantly."
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