In the wake of the Reserve Bank of India’s recent 25-basis-point repo rate cut, investors are actively seeking fixed deposit (FD) schemes with attractive returns. Small finance banks, established to promote financial inclusion, are now offering interest rates as high as 9% per annum for specific tenures.
Small finance banks are a unique category of banks set up by the RBI to bridge the gap in access to banking services for small farmers, micro-businesses, and workers in the unorganized sector. These banks offer a range of fixed deposit schemes, with some offering interest rates as high as 9% per annum. For instance, Unity Small Finance Bank offers 9% for a 1001-day FD, while NorthEast Small Finance Bank offers 9% for deposits between 18 months and 36 months.
Other small finance banks, such as Suryoday, Utkarsh, Jana, and Ujjivan, offer interest rates ranging from 8.1% to 8.5% per annum for deposits ranging from one to five years. AU Small Finance Bank offers 8.1% for an 18-month FD and 7.25% for a one-year FD.
While small finance banks offer higher interest rates, it’s essential to note that deposits up to Rs 5 lakh per depositor are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC). However, financial experts recommend keeping deposits within this insured limit for maximum safety. As these small finance banks operate differently from larger commercial banks, risk management is crucial for investors.
Overall, small finance banks’ FD schemes can be a viable option for investors seeking attractive returns, but it’s important to consider the associated risks and ensure that deposits are within the insured limit to ensure maximum safety.