The Federal Reserve once again increased interest rates recently after a pause. So did the European Central Bank. These central banks are still focused on bringing inflation much lower. Closer home, food inflation has become a cause for concern, though the RBI maintained its pause on rate action, while sounding a somewhat hawkish tone in its policy meeting last week. Therefore, for the foreseeable future, interest rates are likely to be elevated.
For fixed-income investors, especially those preferring plain-vanilla bank deposits, these are good times to lock into healthy interest rates, especially for the elderly.
IndusInd Bank offers reasonable interest on deposits, with the rates looking even more attractive for senior citizens.
Here’s more on the bank’s deposits and why those who are 60 and above can consider it for their debt portfolios.
Higher rates on offer
For tenors of 1 year, 1-2 years and 2 years, the bank offers the general public 7.5 per cent interest and senior citizens 8.25 per cent. The rates for senior citizens are among the highest offered by private banks. For periods of over 2 years and up to 61 months, senior citizens get 8 per cent interest on deposits. Interest rates are compounded quarterly.
These deposits carry the highest ratings (A1+ from CRISIL) and are quite safe. Also, with deposit insurance from the DICGC covering up to Rs 5 lakh, there is an added layer of assurance.
In a portfolio of deposits from highly rated NBFCs and banks, these deposits from IndusInd Bank can occupy a fair part of the overall pie.
For senior citizens looking to beat inflation (pre-tax), deposits in the two-year tenor and even the periods going beyond this timeframe up to five years look quite attractive, as they offer 8 per cent or more.
Senior citizens are eligible for tax deduction of interest income up to Rs 50,000 under Section 80TTB of the Income-Tax Act.
IndusInd Bank is among the largest in India and has seen a healthy improvement in key parameters after the Covid-19 pandemic and related disruptions.
- In FY23, the bank’s net interest income grew 17.27 per cent over FY22 to Rs 17,592 crore.
- The net interest margin improved to 4.27 per cent in FY23, up from 4.11 per cent in FY22.
- Deposits grew 14.56 per cent in FY23 over FY22, and stood at Rs 336,438 crore. Advances grew faster at 21.28 per cent over the same period to Rs 289,924 crore.
- Return on assets increased from 1.28 per cent in FY22, to 1.81 per cent in FY23.
- Cost-to-income increased to 44.3 per cent in FY23, from 42.8 per cent in FY22. The management has said it would remain at 45 per cent levels as it seeks to invest more in physical and digital distribution, as well as increase its focus on retail growth.
- Gross non-performing assets (NPAs) to gross advances improved to 1.98 per cent as of March 2023, down from 2.27 per cent as of March 2022. Net NPAs to net advances came in at 0.59 per cent as of March 2023, better than the 0.64 per cent recorded as of March 2022. These ratios compare favourably with the best in the industry.
- The capital to risk weighted assets ratio (CRAR) or the capital adequacy ratio was strong at 17.86 per cent as of March 2023.
Senior citizen depositors can, thus, safely invest a portion of their debt portfolio comfortably in IndusInd Bank’s deposits.