Suryoday Small Finance Bank begins to pare FD rates

After keeping fixed deposit interest rates relatively high since commencing its operations in January 2017, Suryoday Small Finance Bank has embarked on a path to gradually align them with the rates being offered by mainline banks.

Suryoday SFB has cut interest rates on fixed deposits (FDs) in select maturity buckets by 25-75 basis points (bps) with effect from September 21. One basis point equals one-hundredth of a percentage point.

The bank has pared the FD rate in its ‘sweet spot’ tenure of one to two years by 50 basis points to 8.50 per cent from 9 per cent, said MD and CEO R Baskar Babu.

“We will cut it (interest rate) again after a month by 25 bps. We are getting enough deposits. People are coming and asking why are you paying so much (9 per cent interest rate) when other banks are cutting their FD rates. This is creating discomfort.

“So, we are saying, okay if you (customer) are comfortable, we will keep trimming the interest rate by 25 basis points, bring it down probably to 8 per cent and stay there,” explained Babu.

Among all the maturity buckets, the bank is paying the highest interest rate of 8.75 per cent in the over two years to three years maturity bucket. It has left the interest rate in this maturity bucket unchanged to attract relatively longer term liabilities.

The small finance bank, which is headquartered in Navi Mumbai (the twin city of Mumbai), has kept its savings bank (SB) deposit rate unchanged. The SB rates are 6.25 per cent on deposits up to and including ₹1 lakh; 7.25 per cent for above ₹1 lakh and including ₹10 lakh; and 7 per cent for above ₹10 lakh.

Suryoday SFB has pegged its SB and FD (in the above one-year maturity bucket) rates higher to attract retail deposits after it got converted from a microfinance institution (MFI) into a bank.

Even after the rate cut, the bank is paying about 100-250 bps more on FDs of above one-year tenure compared with what mainline banks are paying.

Since March-end 2017, Suryoday SFB has grown its deposits 10-fold to about ₹250 crore as on date. The bank currently has 16 branches.