Money & Banking

Defying the normal, 5 private banks offer interest rates more than 7% on FDs

K Ramkumar/Surabhi Mumbai | Updated on February 18, 2020 Published on February 18, 2020

Amid declining interest rates, YES Bank, Lakshmi Vilas Bank, RBL Bank, DCB Bank and IDFC First Bank have emerged as outliers, quoting interest rates north of 7 per cent on retail fixed deposits (FDs). Most of the other private sector banks are offering less than 7 per cent.

According to RBI data, banks’ (including public and private sector banks) term deposit rates for durations of more than one year declined to 6-6.40 per cent (as on February 7, 2020), against 6.25-7.50 per cent (as on February 8, 2019), following the 135 basis points reduction in the RBI’s policy repo rate.

Despite the general decline in deposit rates in the banking system, the aforementioned private sector banks are offering interest rates exceeding 7 per cent on certain maturity buckets.

Analysts say the aforesaid private sector banks may be trying to garner more resources via the FD route by offering relatively higher interest rates as they have not yet been able to gain heft on low-cost current account, savings account deposits.

For example, Yes Bank is offering 7.25 per cent interest on FDs in all maturity buckets from 1 year to less than 10 years (with effect from October 25, 2019). Under special rates, the bank is offering the highest rate of 7.50 per cent on two years to less than three years FD.

The highest interest that Yes Bank’s peers — Kotak Mahindra Bank and IndusInd Bank — are offering are 6.20 per cent (on 365 days to less than three years FD) and 6.75 per cent (on 1 year 4 months to below 61 months FD), respectively.

Lakshmi Vilas Bank (LVB) is offering 7 per cent and more on FDs in all maturity buckets between 151 days and 10 years. Within these maturity buckets, the highest interest rate that the bank is offering is 7.80 per cent on 450 days FD (wef October 21, 2019).

The highest interest that LVB’s Tamil Nadu-based peers such as Karur Vysya Bank and City Union Bank are quoting are 6.30 per cent (on two years and above FD) and 6.60 per cent (on one year FD), respectively.

Deposits placed with RBL Bank can fetch 7 per cent plus returns on FDs of 12 months to 120 months duration. The highest interest rate that the Bank is quoting is 7.45 per cent on FD of 24 months to less than 36 months.

DCB Bank depositors can earn 7 per cent plus returns on FDs of 12 months 1 day to 120 months duration. The highest interest rate that the bank is quoting is 7.60 per cent on FD of 36 months.

IDFC First Bank is quoting 7 per cent and above interest rate on FDs from 181 days to 10 years. The highest interest rate that the bank is willing to pay is 7.50 per cent on FD of 500 days.

Amitha Sehgal, Secretary, All India Bank Depositors’ Association, observed that big banks such as State Bank of India, Bank of Baroda, etc have captive deposits like salary accounts, government accounts and so on. But smaller private banks will need to offer some incentive to attract deposits.

“It is given that with high interest rates, some high risk is also involved,” she said.

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Published on February 18, 2020
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