Small finance banks raising deposits to replace high-cost loans

With eight out of 10 small finance banks (SFBs) having become operational, aggressive deposit mobilisation in the first year has turned out to be the key strategy for almost all the new entities.
 

In addition, the new-age banks are betting big on technology to reduce the cost of operations.
 

All the SFBs are offering up to 100-150-basis-point higher interest rates (over market rates) on term deposits.

This apart, some of the banks are eyeing bulk or corporate deposits. The idea behind the move is to replace high-cost loans taken by SFBs as microfinance institutions with relatively low-cost deposits.

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