Tag: deposit rates

SBI announces fees waiver, lower rates to commemorate Independence Day, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


State Bank of India announced concessional interest rates, waiver of processing charges on loans and higher deposit rates on specific tenures to commemorate India’s 75th Independence day.

SBI said it will waive processing fees for its car loan customers, and has offered up to 90% on-road financing for their car loans. Customers applying for a car loan through the bank’s YONO app will get a special interest concession of 25 basis points (bps). YONO users can avail car loans at an interest rate starting at 7.5 per cent per annum, the bank said.

Customers looking for gold loans will get a 75 basis point reduction in the interest rates at 7.50%. One basis points is 0.01 percentage point. No processing fees will be charged for customers applying for gold loans through the YONO app.

The bank had announced a waiver on processing fees on home loans till August 31, 2021. Its home loan starts at 6.70% per annum.

There will be no processing fees charged on personal and pension loan customers.

Frontline healthcare workers will get a 50 basis point concession on personal loans, which will soon be available for application under car and gold loans as well.

SBI is also introducing a ‘platinum term deposits’ for retail depositors giving customers an additional interest rate of up to 15 bps on term deposits for 75 days, 75 weeks, and 75 months tenors starting August 15, 2021 to September 14, 2021.

“We believe that these offerings will help customers to save more on their loans and at the same time add value to their festive celebrations,” the bank’s managing director for retail and digital banking C S Setty said in a release.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , ,

SBI announces fees waiver, lower rates to commemorate Independence Day, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


State Bank of India announced concessional interest rates, waiver of processing charges on loans and higher deposit rates on specific tenures to commemorate India’s 75th Independence day.

SBI said it will waive processing fees for its car loan customers, and has offered up to 90% on-road financing for their car loans. Customers applying for a car loan through the bank’s YONO app will get a special interest concession of 25 basis points (bps). YONO users can avail car loans at an interest rate starting at 7.5 per cent per annum, the bank said.

Customers looking for gold loans will get a 75 basis point reduction in the interest rates at 7.50%. One basis points is 0.01 percentage point. No processing fees will be charged for customers applying for gold loans through the YONO app.

The bank had announced a waiver on processing fees on home loans till August 31, 2021. Its home loan starts at 6.70% per annum.

There will be no processing fees charged on personal and pension loan customers.

Frontline healthcare workers will get a 50 basis point concession on personal loans, which will soon be available for application under car and gold loans as well.

SBI is also introducing a ‘platinum term deposits’ for retail depositors giving customers an additional interest rate of up to 15 bps on term deposits for 75 days, 75 weeks, and 75 months tenors starting August 15, 2021 to September 14, 2021.

“We believe that these offerings will help customers to save more on their loans and at the same time add value to their festive celebrations,” the bank’s managing director for retail and digital banking C S Setty said in a release.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , ,

Banks face hit on margins as deposit rates seen surging, BFSI News, ET BFSI

Banking & Finance

[ad_1]

Read More/Less


Banks are likely to face a dent in their margins in the year ahead.

Net interest margins (NIM), a key indicator of profitability, which have improved for the banks in the last one year are likely to be compressed as borrowings pick up in the year ahead and deposit rates face pressure.

Rising margins

The banks have seen a sharp drop in credit offtake due to pandemic-led slowdown. On the other hand, they saw a huge rise in deposits.

helped with policy cuts, banks have cut interest rates heavily on deposits and lending. However, the drop in interest rates has been bigger than on lending. The weighted average term deposit rate has fallen 80 basis points in the first nine months of this fiscal, while the weighted average lending rate on outstanding loans has fallen by 62 bps. This has led to an increase in banks’ net interest margins in the last one year.

Fourth-quarter NIMs

Net interest margins, which is the difference between the interest income earned and the interest paid by a bank or financial institution relative to its interest-earning assets like cash, have remained in the above 3-percent bracket in the third quarter.

For the December quarter, NIM has remained stable for State Bank of India at 3.34%. For ICICI Bank, it expanded sequentially to 3.67%.

While for Axis Bank, NIM before interest reversals stood at 3.59%.

The year ahead

Credit offtake is expected to be robust in the coming financial year, which would mean a higher demand for deposit funds and hence, a higher rate of interest. This is expected to be driven by investment demand from infrastructure and real estate sectors as well as the release of pent-up consumer demand, thus resulting in high growth in retail finance.

However, experts have started questioning the ability of RBI to continue with its accommodative stance along with trying to achieve its macro-economic targets for inflation and fiscal deficit. All macro-economic indicators together point towards an inevitable rise in deposit rates starting from the second half of the FY 2021-22. Some banks and non-banking finance companies have already started increasing deposit rates across tenures, especially rates on longer-term FDs.

Credit offtake

Banks gave out credit at a faster rate during the fortnight ending February 12, as compared to the same period last year, helped by an increase in retail loans. The bank credit growth was recorded at 6.6%, marginally higher from the 6.4% recorded last year, a report by CARE Ratings showed. With this, the credit growth is back in the range that was last seen during the early months of the pandemic. The credit growth of banks ranged between 6.5% to 7.2% in April 2020.

Deposit growth

Deposits with banks have also increased during the period under review. deposits increased 12.06 during the fortnight ended February 12, 2021, compared with 11.1% growth registered during the fortnight ended January 29, 2021, and also as compared with the previous year,” CARE Ratings said. The report further added that the outflows in debt mutual fund and equity mutual fund could support the rise in bank deposits. Of these deposits, time deposits grew at 89% while demand deposits account for the remaining 11%.



[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , ,

How high fiscal deficit impacts you

Personal Finance

[ad_1]

Read More/Less


A phone call between two friends leads to a conversation on how the government’s fiscal deficit impacts the interest rates in the economy.

Karthik: Hey, will you be following the Budget tomorrow? All eyes will be on the fiscal deficit number.

Akhila: Fiscal deficit?

Karthik: Yes. It shows by how much the government’s total expenditure overshoots its receipts in a year. Usually, most developing countries tend to spend more than what they earn. But too much of anything leads to problems, right?

Akhila: Say, the government runs into a huge deficit this year. What will be the impact?

Karthik: There are many ways in which the deficit could impact a common man. Let me stick to explaining to you how it influences the interest rates in the economy.

Akhila: I’m all ears.

Karthik: Tell me how do you think the government earns revenue?

Akhila: By way of taxes. Ask me about it. I pay tax on almost everything!

Karthik: The government also receives dividends from public sector companies. Disinvestment – selling its stake in public sector units – is yet another revenue generator.

Once it exhausts these options and a few others, it resorts to borrowing from the market to meet its expenses.

Akhila: Oh..

Karthik: But, the government is not the only one borrowing in the market. Private companies too borrow from the market to meet their requirement for funds.

The higher the government’s deficit, the greater need for borrowing. Thus, the demand for limited money available to lend increases.

Akhila: So?

Karthik: Apply the supply and demand concept. A limited supply of something coupled with higher demand leads to a rise in cost.

Akhila: So, in this case, the cost of borrowing increases?

Karthik: Absolutely. The interest rate in the market shoots up.

Resultantly, many businesses may find it difficult to borrow at higher rates and this may impact the overall level of private investment in the economy, leading to lower economic activity over time.

The consequent fall in tax collections, in turn, can adversely impact the government’s revenue and deepen its fiscal deficit.

Akhila: Oh, that’s a vicious circle. If the situation gets worse, the Reserve Bank of India (RBI) may intervene and do something about it, right?

Karthik: That’s a good point.

So, we need to wait and watch how the Central bank comes to the government’s rescue by smoothly managing its borrowing programme, and at the same time keeping the interest rates under check with its monetary policy.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , ,

How you should evaluate returns from bonds

Personal Finance

[ad_1]

Read More/Less


Retail investors have flocked to the ₹5,000-crore bond offer from Power Finance Corporation (PFC), prompting an early closure. One hopes they’ve applied with a good understanding of how this bond compares to other fixed-income avenues. The offer did have some attractive options for retail folks. But reports that did the rounds of the mainstream and social media suggested that when it comes to evaluating bond returns, it is quite okay to compare apples not just to oranges, but also to grapes.

Mind the risks

Company officials promoting the PFC bond were eager to explain how it offered better returns than the National Savings Certificates (NSC). This isn’t strictly true. But even if it were, higher rates on the PFC bond, far from making it more attractive, would indicate higher risks to your capital. In the bond market, high interest rates correlate directly to credit risk.

As a key lender to the troubled power sector with gross NPAs of 7.4 per cent in FY20, PFC’s business carries a fair degree of risk. This is mitigated by the Government of India owning 55.9 per cent stake in PFC, lending it a quasi-government status. The PFC bond is a riskier instrument than the NSC because the latter is Central government-backed and doesn’t require you to take on any business risks.

When evaluating an NCD, it is best to see how much of a spread (extra return) it is offering over a risk-free instrument, which is a Central government bond. Today, the market yield on the five-year government bond is 5.3 per cent. At 5.8 per cent, the five-year PFC bond offered a 50-basis point spread over the G-Secs.

At 6.8 per cent, the NSC, which carries lower risks than PFC, offers 150 basis points (bps) over the G-sec, making it a better choice. The average spreads on five-year AAA, AA and A rated bonds over comparable government securities are currently 37 bps, 104 bps and 300 bps, respectively.

Check tenure

Bank fixed deposits tend to be the default option for investors seeking safety. So, many comparisons have been made between the PFC bonds and bank FDs. Most of these are simplistic comparisons of 5- and 10-year PFC bonds (coupons of 5.8 per cent and 7 per cent) with SBI’s 1- to 5-year deposit rates (5-5.4 per cent).

But it is plain wrong to compare rates on a 1-5 year instrument with a 5-10 year instrument. In the fixed-income market, investors are always compensated for longer holding periods with higher rates, given the time value of money and higher business uncertainties that come with lending for the longer term. If you would really like to compare PFC’s bonds with bank FDs, you would be better off looking at similar tenures. PFC’s three-year bond offered 4.8 per cent against the 5.3 per cent on SBI’s three-year FD. Its five-year bond will fetch 5.8 per cent against 5.4 per cent on the SBI FD.

Even then, the decision on the tenure of fixed-income security what you should buy should be based on your view on how interest rates will move in future and not on absolute rates.

If you buy a 10-year bond today and rates move up in the next 2-3 years, you’d risk capital losses if you try to switch to better-rated instruments.

Beware of market risks

Some have compared PFC bonds to debt mutual funds and concluded the latter are better.

Debt mutual funds which invest in high-quality bonds (corporate debt funds and PSU & banking funds) have delivered category returns of over 9 per cent for one year and 8 per cent for three and five years.

But comparing trailing returns of debt funds to the future returns on PFC bonds is akin to zipping on a highway using the rear-view mirror.

Returns on debt funds in the last one, three and five years have been boosted by falling rates triggering bond price gains.

Should rates bottom out or begin to rise, these gains can swiftly turn into losses. To gauge future returns on debt funds, the current yield to maturity (YTM) of their portfolios and their expense ratios are more useful.

Current YTMs of corporate bond funds are in the 4.5-5.5 per cent range with annual expenses at 0.4-1 per cent for regular plans, pointing to returns of 3.5-5.1 per cent from here, without budgeting for rate hikes. PFC bonds, by offering you a predictable 5.8 per cent for five years, are a better bet if you think rates are bottoming out.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , ,

DCB Health Plus FD: Beats most peers in returns

Personal Finance

[ad_1]

Read More/Less


Are you hunting for fixed deposit schemes that offer best returns? You can consider DCB Bank’s Health Plus Fixed Deposit (FD) as they offer relatively higher interest rates than most banks. This fixed deposit scheme also comes with free medical benefits.

Rate and tenure

DCB Health Plus FD offers one of the best returns at 6.9 per cent per annum on a 700-day (almost two years) fixed deposit. The interest rates in India are close to bottoming out and may remain at these levels till the economy recovers. At the same time, the rate cycle cannot persist at the current levels for a long period too given the elevated inflation and signs of green shoots in the economy. At this juncture, lock-in of investment for about two years is tenable. This also gives the investor an opportunity to reinvest at higher rates once the interest rates head up. DCB’s 6.9 per cent rate also looks attractive compared to rates offered on similar tenure bank FDs. While most public sector banks offer only 5-5.3 per cent interest rate for this bucket, private sector banks give up to 6.5 per cent for the same period.

Bank deposits are covered by the Deposit Insurance and Credit Guarantee Corporation of India (up to ₹5 lakh for both principal and interest). Thus, this deposit is a good option for those who don’t have much appetite for risk. Senior citizens will get an additional 0.5 per cent interest over and above the FD rates being offered by the bank.

Medical benefits

DCB’s Health-plus FD also offers free medical benefits such as teleconsultations and face-to-face appointments with empanelled general physicians and specialists, in addition to ambulance services. For this, DCB Bank has tied up with ICICI Lombard General Insurance Company. The only important condition here is that the minimum fixed deposit should be ₹10,000.

However, the benefits vary with the amount of fixed deposit. Say, for a fixed deposit of ₹25 lakh and above, 10 teleconsultations, 10 face-to-face appointments, pharmacy expenses of ₹3,000 comes for free along with unlimited ambulance services. While for a FD of less than ₹ 1 lakh, medical benefits include only four free teleconsultations.

To make use of the benefits, the customer should download the ‘IL Take Care’ mobile app. The medical benefits continue throughout the tenure of the deposit. In case of premature closure, the free health benefit will also cease to exist.

About DCB Bank

DCB Bank offers loans to diversified segments including micro-SMEs, SMEs, mid-corporate, micro finance institutions and NBFCs. .As on September 30, 2020, DCB’s gross and net NPA were at a reasonable 2.27 per cent and 0.83 per cent, respectively. The collection efficiencies, which were hit during the lockdown period – have been improving since June 2020. In September 2020, the collection efficiencies for the segments – loans agianst proporty, home loans and commercial vehicles stood at 88 per cent, 91 per cent and 77 per cent respectively. The bank is also adequately capitalised with total capital adequacy ratio at 18.28 per cent.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , ,

What are the less risky options for higher returns on your FDs

Personal Finance

[ad_1]

Read More/Less


My wife has a fixed deposit of ₹3-lakh in Dena Bank. Now, with the merger of the bank with Bank of Baroda, we would like to discontinue it and switch it over to some other bank. On checking with Indian Overseas Bank, we found they offer 5.2 per cent for 3- to 5- year tenures . I am looking to invest with a horizon of 3-5 years in a safe and less risky asset with a 7 to 8 per cent yield. Please suggest a suitable investment avenue.

— N.P. Desai

Given that the full financial impact of Covid-related moratoriums and concessions on bank financials is not yet known, it is best to stick to larger and financially stronger banks and NBFCs for deposits at this juncture. Switching your deposit out of Bank of Baroda into Indian Overseas Bank (IOB) for a 5.2 per cent rate is not a prudent course of action in this context as Bank of Baroda is a stronger and larger bank. In the quarter ended September 2020, IOB had reported net profits of ₹148 crore, managing a turnaround from losses in the previous year, with gross NPAs of over 13 per cent and capital adequacy ratio of 10.9 per cent. The bank was also placed under RBI’s Prompt Corrective Action framework.

Bank of Baroda, apart from being consistently profitable, had comfortable capital adequacy of 13.2 per cent as of the same date. Given that RBI’s policy rates today are at their lowest levels in two decades at 4 per cent and market interest rates for highly rated entities are at rock-bottom too, you can get a 7 to 8 per cent return only from riskier entities. Given that the rates may go up at least a bit once the economic situation normalises from Covid, locking into these low rates for periods beyond a year is not advisable. Therefore, it is best not to consider 3- to 5-year fixed deposits currently and stick with up to 1 year deposits even if rates seem unappealing.

Having said this, we can suggest three courses of action given the situation. If you would like a slightly higher yield on your fixed deposits, you can consider the one-year post office time deposits offering 5.5 per cent which offer superior safety with a higher return. If you really seek higher returns and don’t mind some risks with it, you can stay with Bank of Baroda for some of your money and diversify into 1- year deposits from small finance banks such as Equitas for say, one-third of the money. Such banks, however, do lend to riskier segments of small borrowers and, therefore, your deposits are subject to higher risks than with the leading commercial banks like Bank of Baroda.

Deposits with top-rated NBFCs such as Sundaram Finance or HDFC which offer about 5.7 per cent on cumulative deposits of up to 1 year can also be an option. If monthly income is your objective, the Post Office Monthly Income Account offering 6.6 per cent is an option to look at too, though the long lock-in of five years is a deterrent. If your wife is a senior citizen you can also consider the post office senior citizens savings scheme offering 7.4 per cent, albeit with a 5-year lock-in period.

[ad_2]

CLICK HERE TO APPLY

Leave a comment , , , , , , ,