Kolkata: India is now firmly set on the path of interest rate downcycle. The Monetary Policy Committee, the rate setting body of Reserve Bank of India, has unanimously cut Repo Rate by 25 basis points both in its February and April meetings. All expert agencies are certain that the central bank of the country will continue trimming interest rates if the inflation remains under control, which looks like a distinct possibility. While any cut in interest rates is supposed to boost consumption, and in turn generate more investment and employment, rate cuts are a distressing signal for those who depend on fixed deposits — both from banks and NBFCs — for their income, which are typically senior citizens and retirees.
Following the consecutive rate cuts by RBI, major banks have started slashing their interest rates of fixed deposits. The only saving grace is that rate cuts of FDs don’t become effective retrospectively — those who have already parked their funds on higher FD rates will continue to earn interest at the contracted rate. Since rates are supposed to climb down steadily, this is the last chance for common people to lock in higher rates on some FDs. In fact, a few banks are still offering interest rates of 9% or more on FDs of various tenures.
Suryoday Small Finance Bank FD
Suryoday Small Finance Bank pays an interest of 9.10% to senior citizens on five-year FDs. Significantly, FDs with five-year tenure is also known as tax-saver FDs. The rate applicable to general depositors is 8.60%.
Utkarsh Small Finance Bank FD
Utkarsh Small Finance Bank pays an interest rate of 9.1% — also the highest rate of interest paid by this bank — to senior citizens on FDs in two maturity baskets. These are FDs maturing in two years (730 days) to three years (1,095 days) and those maturing between four years (1,461 days) and 1,499 days. The rate paid to general depositors in these two maturity baskets are 8.50%.
Unity Bank Small Finance Bank FD
Unity Bank Small Finance Bank pays interest of 9.10% to senior citizens on FDs that mature in 1,001 days. For general customers, however, the rate is 8.60%. Incidentally, this is the highest rate of interest the bank offers.
North East Small Finance Bank FD
The interest rate paid by North East Small Finance Bank is 9% on FDs with maturity period between 18 months 1 Day to 18 months 2 day. These are callable FDs. On non-callable FDs, the rate of interest is the same 9% on FDs maturing between 18 months 1 Day to 36 months. Significantly, the rate of interest applicable to general depositors is the same. “Premature withdrawal of callable deposits will incur a penalty of 1% over the interest rate applicable for the actual deposit period,” the bank has mentioned in its website.
Small finance banks are regulated by Reserve Bank of India and deposits in these are guaranteed by the Deposit Insurance and Credit Guarantee Corporation (DICGC) up to Rs 5 lakh per depositor. However, it must be remembered that one should consult a qualified personal finance adviser to find out whether FDs suit their financial needs and goals before putting their hard-earned money into them.
After Reserve Bank of India cut Repo Rate in April, several big banks such as SBI, HDFC Bank, ICICI Bank, Yes Bank, IDFC Bank, Canara Bank have slashed their fixed deposit rates and more banks are expected to follow suit. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
