After increasing interest rates 10 times over the past year, the Reserve Bank of India hit the pause button in its last monetary policy meeting, and even the Federal Reserve has signalled a possibility of no further hikes in the near future. As a result, bond yields have been steadily falling across tenors.
All these moves suggest that interest rates may have topped out or may be very close to the peak. Depositors must therefore look to lock into attractive deposits that offer higher rates with adequate safety. Small finance banks have upped the ante on the rates of deposits.
In this regard, Fincare Small Finance Bank’s 1000-day deposits seem inviting for depositors, more so for senior citizens. Here’s more on the bank’s deposit offering.
High rates on offer
Fincare Small Finance Bank offers deposits of various tenors, and among them, the 1000-day deposit offer the best rates.
The interest rate on the 1000-day deposit for the general public is 8.41 per cent and for senior citizens 9.01 per cent. These are better than what most large public and private sector banks offer for similar tenors and are quite attractive.
These deposits offer interest rates that are compounded on a monthly basis. Therefore, the effective annual yield for the general public works out to 8.68 per cent, while that for seniors is 9.32 per cent.
Fincare Small Finance Bank’s deposits come with cumulative, monthly and quarterly interest payout options. Depositors can choose the regular interest payout options in case they require steady cashflows.
Investors upon filling the online form seeding the Aadhaar and PAN details, the bank will revert back for opening the deposits.
As with all regular banks, deposits up to ₹5 lakh are covered by the Deposit Insurance and Credit Guarantee Corporation (DICGC), a division of the Reserve Bank of India (RBI).
Depositors can park a part of their debt portfolio in these deposits, preferably to coincide with a moderate-sized goal.
Improving metrics
Given that Fincare Small Finance Bank isn’t a listed entity, there aren’t any detailed investor presentations available in public domain. But from the limited financial statements available on its website, a few key metrics seem to be on the mend for the bank.
Its main business is microfinance lending, which accounts for the bulk of its book. The bank is looking to diversify into areas such as loan against property, gold loan and affordable housing.
The gross non-performing assets (GNPA) ratio improved substantially from 7.79 per cent in FY22 to 3.25 per cent in FY23 as Covid-related stress in asset quality was reasonably alleviated in the recent fiscal. The net NPA ratio improved to 1.3 per cent in FY23 from 3.55 per cent in FY22.
The return on assets improved from 0.1 per cent in FY22 (low base due to Covid-related stress) to 0.95 per cent in FY23 and capital adequacy remains strong at 20.04 per cent as of March 2023.
Given the improvement in key metrics of the bank, there is a fair degree of comfort for investors to park money in its deposits.