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Looking for the best interest rates among fixed deposits? You can consider small finance banks (SFB) as they offer relatively higher interest rates than most public and private sector banks. Though interest rates from SFBs are similar to or lower than what is being offered by a few non-banking financial companies (NBFCs), the risk factor is higher in the latter. Apart from the usual credit risk, the recent liquidity crisis faced by the NBFC segment pegs up the risk.
SFBs focus on the under-served sections of the economy such as small business units, small and marginal farmers, and micro and small industries. But while these banks have restrictions on their lending activity (75 per cent of loans in priority sector and at least 50 per cent loans of less than ₹25 lakh), there is no such curb on deposit-taking.
FD interest rates from Jana Small Finance Bank are among the best now offered by SFBs.
Benefits
Investors can go for the 36-month FD regular scheme of Jana SFB which offers an attractive interest rate of 9 per cent per annum. The 36-month tenure option leaves open the opportunity to re-invest at higher rates if interest rates move up over the medium term.
While most public sector banks offer only 6-7 per cent interest rate for this bucket, private sector banks give up to 8 per cent for the same period.
Shriram Transport Finance offers a similar 9 per cent interest for the same period, and is among the best offers from NBFCs. But the risks attached to NBFC FDs are higher due to reasons mentioned above.
Besides, NBFC deposits do not carry any insurance cover. SFB deposits are covered by the Deposit Insurance and Credit Guarantee Corporation of India. Each depositor is insured up to ₹1 lakh for both principal and interest.
Thus, this deposit is a good option for those who don’t have much appetite for risk. Investors can park a portion of their surplus in this scheme.
Senior citizens will get an additional 0.6 per cent interest over and above the FD rates being offered by the company. In case of premature withdrawal of the deposit, the SFB will deduct a penalty of 0.5-1 per cent from the applicable rate of interest.
About the bank
Jana Small Finance Bank, erstwhile Janalakshmi Financial Services, commenced its operations on March 28, 2018, and is headquartered in Bengaluru. The company has a diversified presence, with its top three States — Tamil Nadu, Karnataka and Maharashtra — contributing about 50 per cent of the overall portfolio, a year ago.
The bank currently offers loans to the agriculture, business and home development segments. It is planning to enter the consumer durables and two-wheeler loan segments in the near future. As of FY17, its loan growth (year-on-year) stood at 16.6 per cent, while its net profit growth was 6.3 per cent. Jana SFB’s NPA was at 0.69 and net NPA at 0.55.
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