Earn As High As 9% Interest Rate On Bank Fixed Deposits, Far Ahead Of SBI's

The earning differential between the big commercial banks and small finance banks is not restricted only to the one-year long FDs, but to all tenures.

Earn As High As 9% Interest Rate On Bank Fixed Deposits, Far Ahead Of SBI's

One can even open an FD with a small finance bank online.

As the fixed deposit (FD) rates of big commercial banks such as State Bank of India (SBI) have now slid below 7 per cent per annum, the small finance banks offer a viable and pragmatic alternative to depositors for pocketing some extra bucks. The small finance banks are just like big commercial ones with the difference lying in the restrictions imposed on them relating to loan disbursements.Unlike big commercial banks such as State Bank of India (SBI), PNB; the small finance banks are not permitted to lend to corporate borrowers, among other restriction.

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.

"As of now, the Small Finance Banks do not pose any risks more than that of any other banks in the country," says an official of Equitas Small Finance Bank.

State Bank of India's (SBI) Fixed Deposit (FD) interest rates

TenorsExisting for Public w.e.f. 28.03.2018Revised For Public w.e.f. 28.05.2018Existing for Senior Citizens w.e.f. 28.03.2018Revised for Senior Citizens w.e.f. 28.05.2018
7 days to 45 days5.755.756.256.25
46 days to 179 days6.256.256.756.75
180 days to 210 days6.356.356.856.85
211 days to less than 1 year6.
1 year to less than 2 year6.46.656.97.15
2 years to less than 3 years6.66.657.17.15
3 years to less than 5 years6.
5 years and up to 10 years6.756.757.257.25

Fincare Small Finance Bank's Fixed Deposit (FD) interest rates 
TenureGeneral PublicSenior Citizens**
7 days to 45 days4.00%4.50%
46 days to 90 days4.00%4.50%
91 days to 180 days6.00%6.50%
181 days to 364 days7.00%7.50%
12 months to 15 months8.00%8.50%
15 months 1 day to 18 months8.25%8.75%
18 months 1 day to 21 months8.50%9.00%
21 months 1 day to 24 months8.75%9.25%
24 months 1 day to 36 months9.00%9.50%
3 years 1 day to 5 years8.00%8.50%
5 years 1 day to 7 years7.00%7.50%
5 years 1 day to 7 years7.00%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 BUCKETSInterest Rate / Card Rate p.a. (%)Senior Citizen Interest Rate p.a. (%)For NRE*/NRO Interest Rate p.a. (%)
7 Days to 1 Month 15 Days5.50%6.00%5.50%
1 Month 16 Days to 3 Months6.75%7.25%6.75%
3 Months 1 Day to 6 Months6.90%7.40%6.90%
6 Months 1 Day to 12 Months7.00%7.50%7.00%
12 Months 1 Day to 18 Months7.15%7.65%7.15%
18 Months 1 Day to 24 Months7.15%7.65%7.15%
24 Months 1 Day to 36 Months7.25%7.75%7.25%
36 Months 1 Day to 45 Months7.30%7.80%7.30%
45 Months 1 Day to 60 Months7.40%7.90%7.40%
Above 60 Months*7.25%7.75%7.25%

Equitas Small Finance Bank Fixed Deposit (FD) Interest rates
Tenure interest rates
7 - 14 days5.00%
15 - 29 days5.50%
30 - 45 days6.00%
46 - 62 days6.25%
63 - 90 days6.25%
91 - 120 days6.50%
121 - 180 days6.50%
181 - 210 days6.75%
211 - 270 days6.75%
271 - 364 days7.00%
1 year to 18 months7.50%
18 months 1 day to 2 year7.75%
2 years 1 day to 3 years7.75%
3 years 1 day to 4 years 7.00%
4 years 1 day to 5 years7.00%
5 years 1 day to 10 years7.00%

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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