Bangalore-based Jana Small Finance Bank has announced an increase in its fixed deposit (FD) interest rates effective January 2nd, 2024. The bank is now offering FD interest rates of up to 9% for senior citizens and 8.5% for the general public. This makes Jana Small Finance Bank’s FD rates among the highest offered by small finance banks in India.
The revised interest rates on FDs are as follows.
FD Tenure: Interest Rate for General Public: Interest Rate for Senior Citizens…
- 7 – 14 days: 3%: 3.5%
- 15 – 60 days: 4.25%: 4.75%
- 61 – 90 days: 5%: 5.5%
- 91 – 180 days: 6.5%: 7%
- 181 – 364 days: 8%: 8.5%
- 365 days: 8.5%: 9%
The bank has increased its 1-year FD rate from 8% to 8.5% for the general public and from 8.5% to 9% for senior citizens, making it very attractive for depositors looking for high-yield short-term FDs.
Rationale Behind the Rate Hike
Several factors have led Jana Small Finance Bank to increase its FD rates. High inflation and RBI’s repeated interest rate hikes in 2022 led to banks increasing their deposit rates to attract more funds. The ongoing liquidity tightening has also compelled banks to offer higher interest rates on deposits.
As a small finance bank, Jana SFB has to maintain a higher liquidity coverage ratio. With rising credit demand, the bank needs a steady inflow of deposits to maintain sufficient liquidity buffers. Offering higher returns on FDs allows Jana to attract more depositors.
Small finance banks also have higher costs of funds compared to larger banks, necessitating higher deposit rates to attract funds. The bank can offer up to 9% interest on 1-year FDs as per RBI regulations. This gives them an edge over larger banks in attracting depositors looking for short-term high-yield FDs.
Key Things to Know
- The revised FD rates are applicable on fresh deposits as well as renewals.
- Interest rates are compounded quarterly for FDs above 1 year.
- Senior citizens get an additional 0.5% interest rate across all tenures.
- Deposits up to Rs 5 lakh are covered under the deposit insurance guarantee of up to Rs 5 lakh per depositor.
- Premature withdrawal is allowed but at a penalty of 1% on applicable interest rates.
With the rate hike, Jana Small Finance Bank’s 1-year FD rate is now higher than SBI (6.1%), PNB (6.5%) and on par with top private banks like HDFC Bank (8.5%) and ICICI Bank (8.5%). For senior citizens, it offers the highest rate of 9%, making it an attractive fixed-income option for parking short-term funds.