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At a time when deposit rates are trending lower, Suryoday Small Finance Bank, the newest entrant in the world of banking, has decided to go in for aggressive pricing of fixed deposits.
It is offering 9 per cent interest on deposits of one to two years tenor. Senior citizens will earn 9.75 per cent for the same tenor.
First branch openedThe bank, which was a micro-finance institution in its earlier avatar, on Monday opened its first branch close to its headquarters in Belapur, Navi Mumbai.
R Baskar Babu, MD and CEO, Suryoday Small Finance Bank (SSFB), said: “On fixed deposits in the one to two years tenor, we are paying 9 per cent interest. This is our peak deposit rate.
“And specifically for senior citizens we are paying 9.75 per cent interest.
“Usually, banks pay 50 basis points more to senior citizens but we decided to pay 75 basis points more in that particular (one to two years) tenor.” One basis point is equal to one-hundredth of a percentage point.
By contrast, a large bank such as Bank of Baroda is currently paying 7 per cent interest on fixed deposits (of up to ₹1 crore) of one to two years.
On savings bank (SB) deposits, SSFB is paying 6.25 per cent interest on deposits of up to ₹1 lakh; 7.25 per cent on deposits of ₹1-10 lakh; and 7 per cent on deposits above ₹10 lakh.
Most of the mainstream banks offer a flat interest rate of 4 per cent on SB deposits.
Babu emphasised that his bank is not focussing on bulk deposits but on granular (retail) deposits.
“Within retail deposits, we want to really focus on the senior citizens segment where every percentage more of interest makes a lot of difference to them.
“We want to address this segment so that they get a steady stream of income,” he said.
Interest on monthly basisSSFB will pay interest on a monthly basis on savings bank deposits. Babu said: “Most of the banks credit interest on a quarterly basis. So, probably, we will be the first bank to credit interest on a monthly basis.”
Chennai-based peer bank Equitas Small Finance Bank (ESFB) is paying a peak interest rate of 8.85 per cent on fixed deposits of two-to-three-year tenors. Senior citizens earn 9.35 per cent interest on FDs in this tenor.
ESFB, which launched its operations in September 2016, is paying 6 per cent interest on SB deposits of up to ₹1 lakh; 6.50 per cent on deposits of ₹1-50 lakh; 7 per cent for ₹50 lakh to ₹10 crore; and 7.25 per cent on ₹10 crore and above.
Objectives of small banksAccording to the RBI, the objectives of setting up small finance banks are to further financial inclusion by providing savings vehicles, and supplying of credit to small business units, small and marginal farmers, micro and small industries, and other unorganised sector entities through high-technology, low-cost operations.
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