Banks launch innovative, high-yielding products to prop up deposits

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Banks are launching new, innovative deposit schemes which offer higher rate of interest and also resemble capital market instruments like liquid funds and systematic investment planning (SIP) to regain customers lost to equity market.

Jana Small Finance Bank, for instance, on September 19 launched a “Liquid Plus” fixed deposit product which offers interest rate of 6.75 per cent for tenures ranging from 7 to 180 days. “The rate is applicable for the minimum deposit amount of ₹10 lakhfor retail deposits up to ₹3 crore and above ₹3 crore to ₹200 crore for bulk deposits per customer,” the lender said in a release.

The liquid plus fixed deposit, makes short-term deployment of funds easier and attractive with higher returns. The lender undertook this step based on the feedback from customers seeking placement of short term funds. The scheme is targeted for both retail and high-net-worth individuals (HNIs), and corporates seeking short term investment options with muted risk.

Apart from offering high interest rates, this product enables features like T+0 redemption, availability of partial withdrawal feature without charge and instant overdraft facility.

Analysts say more lenders are expected to roll out such products to counter deposit mobilisation challenge. The funds will bring in much needed short term capital for banks, especially when savers are increasingly becoming investors in the capital market.

Bank of Baroda (BoB) MD, CEO Debadatta Chand said the bank recently renamed a recurring deposit product as systematic deposit plan (SDP), which offers modest returns, and it also resembles the popular SIP schemes offered by mutual funds. According to BoB website, some of the features of SDP scheme include allowing monthly contribution of just ₹50 in rural and semi-urban areas, 1 per cent higher rate of interest for senior citizens, instant loans and an overdraft facility of up to 95 per cent of the deposit amount.

“I feel it (deposit mobilisation) is more of a transient, not a structural issue at this point of time. At the same time, we as a bank typically need to figure out how to address the change of preference happening for savers. Deposit is not going to be a generic product, it has to be a bundled product now,” he said.

Earlier this month, fintech platform Tarrakki signed a pact with Suryoday Small Finance Bank to develop and offer digital fixed deposits. Through this partnership, Tarrakki will help develop tech products that outperforms legacy systems enabling the small finance bank to efficiently onboard new customers and offer digital fixed deposit products.