Jana SFB ups short term deposit rate, aims to compete with liquid MF

Jana Small Finance Bank on Thursday announced a new deposit scheme offering 6.75 per cent for tenures ranging from seven to 180 days. The rate is applicable for the minimum deposit amount of Rs 10 lakh for retail deposits up to Rs 3 crore; and above Rs 3 crore to Rs 200 crore for bulk deposits.

The new scheme offers features like T+0 (same day) redemption, availability of partial withdrawal feature and instant overdraft facility, the bank said in a statement, adding there are no pre-maturity redemption charges.

“The product is designed to provide flexibility, which also offer better returns. There is no cost for early redemption or partial withdrawal. And we will pay the customer on the same day. In case of liquid mutual fund, the settlement is T+1. If the customer does not want partial withdrawal, we will give an overdraft,” Ajay Kanwal, MD & CEO, Jana SFB told Business Standard in a telephonic conversation.

The move comes at a time when banks are scrambling for deposits, amid healthy loan growth. Analysts have said the higher returns from equity markets have lured investors to put their funds in stocks and mutual funds, rather than in bank deposits.

Despite offering higher rates, the cost of funds of Jana SFB will not increase, because most of the deposits of the bank is with over one-year maturity and the cost of funds was 8 per cent during the first quarter of the current financial year.

“For us, the cost of funds will come down. We don’t have any short term book [deposit]. 98 per cent of our deposits are one year plus. I did not take short term deposits in the past and I don’t have short term loans. But now in the last two years, we are doing vendor financing, supply chain – which are all short term – 90-180 days book. So, now I can easily match it [with these short term deposits],” Kanwal explains.

“I think the market has to realise that customers are more interested in short term deposits,” Kanwal added.