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Business News/ Money / Personal-finance/  Savings and loans with the new small finance banks

Savings and loans with the new small finance banks

We look at five new small finance banks in the market:, and their attractive deposit rates but expensive loans

Photo by: Hemant Mishra/MintPremium
Photo by: Hemant Mishra/Mint

Ujjivan Small Finance Bank Ltd is the latest small finance bank (SFB) to start operations in India. As of now, there are five SFBs—Capital Small Finance Bank Ltd, Suryoday Small Finance Bank Ltd, Equitas Small Finance Bank Ltd, Utkarsh Small Finance Bank Ltd and Ujjivan Small Finance Bank Ltd. Mint Money looks at the various retail products that these banks offer.

Interest rates on savings accounts vary for these newly launched banks. Suryoday SFB offers 6.25-7.25% depending on the amount you leave in the savings account. For instance, for a balance up to Rs1 lakh, you will get 6.25% per annum; 7.25% for balance over Rs1 lakh but up to Rs10 lakh and 7.00% on balance over Rs10 lakh.

Equitas SFB is offering 6-7.50% per annum on savings accounts. Utkarsh SFB is offering 6% for any amount. Both Ujjivan and Capital SFBs are offering 4%, which is in line with large commercial banks. “We believe savings account is not interest rate sensitive. Hence, we have left is at 4%. We give other benefits on savings account such as no minimum balance. In case of FDs, people are rate sensitive. We will keep it 1% higher than the average industry rate," said Samit Ghosh, managing director and chief executive officer, Ujjivan Small Finance Bank.

Suryoday SFB offers 8.75-9%—the highest in the SFB category—in 1-3 year tenures. Equitas SFB and Utkarsh SFB offer 8-8.85% for 1-3-year maturity basket. SFBs also offer recurring deposits and the interest rates are similar to the fixed deposit rates.

Like other commercial banks, SFBs, too, can offer loan products. However, the product offerings of these banks are different since the target consumers are different. For instance, Capital SFB offers housing loans, personal loans, consumer loans and auto loans. The interest rate on 1-year marginal cost-based lending rate (MCLR) which stands at 9.80% per annum and interest rate on home loans ranges between 10.55% and 10.80%. Other loans are also linked to MCLR with a spread of 3-6%. Ujjivan SFB is giving micro loans, home loans and small business loans. Home loan amount ranges from Rs2-15 lakh and interest is between 12.75% and 15.75%. Suryoday SFB provides individual loans, shopkeeper loans, loan against property, MSME loans and joint liability group loans.

All these banks offer RuPay debit cards. There are charges on this—an annual fee and issuance fee of Rs50-150. The debit cards have an insurance cover of Rs1 lakh from National Payments Corporation of India (NPCI) for accidental death and permanent disability. This can be claimed only if the RuPay card holder has carried out at least one successful financial or non-financial purchase and up to 45 days prior to the date of incident resulting into accidental death or permanent disability. These banks also offer lockers. For instance, Capital SFB provides lockers for Rs750-2,000 depending on the size.

When it comes to loans, the focus of these banks is on mid- and lower-income categories and their focus is on priority sector lending. Currently, the interest rates on the loans they offer are on the higher side compared with what large commercial banks have. But in case of deposits, these banks are offering rates that are 100-250 basis points higher than large commercial banks. One basis point is one-hundredth of a percentage point. So, if you want to invest in fixed deposits, these banks could be an option. But do factor in service and convenience.

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Published: 08 Feb 2017, 05:59 PM IST
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