Chennai-based Suryoday Small Finance Bank (SFB) is finalising a 20-year Fixed Deposit, the likes of which is not available in the market and has et people wondering as to how the instrument might be structured.
“Currently, banks offer FDs for up to 10 years. We are working on a longer tenor FD,” R Baskar Babu, managing director and chief executive officer of Suryoday SFB told the media.
No FD beyond 10 years
While Fixed Deposits are necessary for any portfolio, no lender has yet thought of any retail deposit beyond 10 years. In this financial climate, Suryoday SFB has stirred the imagination of experts by revealing its plans.
Suryoday SFB was set up in November 2008 as Suryoday Micro Finance Private Limited. The Reserve Bank of India (RBI) granted it a license to operate as a small finance bank in 2017.
Systematic withdrawal
Elaborating the concept Babu said, “The product is at the trying stage. We are looking at the interest rate risk and all that…So, if a customer saves, say, Rs 50,000 per month for 10-11 years, after the 11th year he can opt for a systemic withdrawal plan, which is, say, two times the invested amount, automatically for another 11 years.”
Novelty factor
It is quite clear that the product would be quite different from a run-of-the-mill FD since no FD in the market right now offers systematic withdrawal facilities.
Investment strategist and director Wishlist Capital, Nilanjan Dey told News9live that it would be difficult to imagine a person to invest a significant sum of money and wait for it for 2 decades.
The interest rate for this FD product could be linked to the 10-year benchmark government securities which offer a yield of 6.85%.
FM, RBI guv urge
Right now, SBI is perhaps the only bank that offers an annuity scheme for 3/5/10 years where a customer can deposit a one-time amount and get paid in monthly instalments.
Suryoday SFB’s announcement comes against the recent statement of Finance Minister Nirmala Sitharaman urging banks to come up with innovative products to boost deposits from customers. RBI governor Shaktikanta Das, too, has underscored the need for banks to shore up their deposits since more and more households are entrusting their savings with market-linked products such as equities and mutual funds.
A 20-year fixed deposit is unheard of in India. If Suryoday Small Finance Bank can finally offer it in the market it could spark a lot of interest. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
