Fixed Deposit linked to repo rate launched – Check features and find out whom it suits

Bank fixed deposits are known for fixed interest rates but not anymore. YES Bank has launched ‘Floating Rate Fixed Deposit, a novel product offering for all domestic customers. The rate of interest on this fixed deposit (FD) will be linked to the prevailing Repo rate, allowing the customers of the bank to enjoy dynamic returns on their fixed deposits.

Floating Rate Fixed Deposit is a unique offering designed to benefit customers by enabling them with an asset class that offers the safety of a fixed deposit along with dynamic returns which are linked to the Repo rates published by the central bank.

This floating rate FD can be availed for a tenure of 1 year to less than 3 years, as per one’s preference. Importantly, only the reinvestment option is available with payout at maturity. There is an option for premature withdrawal but with an applicable penalty.

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The minimum deposit amount of Floating Rate Fixed Deposit is Rs 10,000 and the FD scheme is only available for Resident Individuals and Non-Individuals. One may continue to enjoy liquidity with an Overdraft facility on the FD up to 90% of the principal value.

The revision on the FD’s interest rate will happen automatically and will not require any manual intervention by the Bank or the FD holder. There will be automatic reset of the interest rate monthly as per the applicable REPO rate in the previous month.

Interest Rate: (For less than Rs 5 Crore)

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Current Repo Rate: 4.90%

1 Year to < 18 Months : 6.00% ( After Mark-up of 1.1%)

18 Months to < 3 Years : 6.50% ( After Mark-up of 1.60%)

In a rising interest rate scenario, such a floating FD scheme helps but when rates start moving downwards, the yield also falls. Those who expect repo rates to move up over the next three years may consider after consulting their financial advisor.

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