Small Finance Banks Offer Up to 9% Interest on FDs
The Reserve Bank of India (RBI) recently announced a 25 basis points cut in the repo rate, prompting many fixed deposit (FD) investors to seek out the best interest rates available. In response, several small finance banks (SFBs) are now offering competitive rates, with some reaching as high as 9% for specific tenures. This surge in interest rates is attracting attention from investors looking to maximize their returns.
Competitive Rates from Leading Small Finance Banks
Small finance banks are designed to enhance financial inclusion by providing essential banking services to underserved segments of society, including small industries and individuals in the unorganized sector. Currently, these banks are offering some of the most attractive FD rates in the market. Here’s a closer look at the offerings from various SFBs:
- Unity Small Finance Bank leads the pack with a remarkable 9% interest rate for deposits with a tenure of 1001 days. For one-year fixed deposits, they offer a competitive 7.85%.
- NorthEast Small Finance Bank matches the 9% rate for deposits ranging from 18 months and one day to 36 months, while their one-year FD scheme offers a 7% interest rate.
- Suryoday Small Finance Bank provides an 8.6% interest rate for five-year deposits, with a one-year option at 8.25%.
- Utkarsh Small Finance Bank offers 8.5% for deposits of 2 to 3 years and 8% for one-year FDs.
- ESAF Small Finance Bank has an 8.38% rate for 888-day deposits, although their one-year option is lower at 6%.Other banks like Equitas, Jana, Ujjivan, and AU Small Finance Bank are also offering competitive rates, generally around 8.25% for various tenures.
Safety and Insurance for Depositors
Deposits in small finance banks are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) up to ₹5 lakh. This insurance provides a safety net for depositors, ensuring that their principal and accrued interest are protected in case of unforeseen circumstances. However, financial experts advise caution when investing in these banks, as they operate under different regulations compared to traditional commercial banks.
To mitigate risks, it is recommended that investors limit their deposits in small finance banks to stay within the DICGC insurance coverage. This strategy helps ensure the safety of their investments while still taking advantage of the higher interest rates offered by these institutions.
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