As in the current banking practice, most of the banks and financial institutions avail fixed deposits (FD) with a maximum term of up to 10 years. Nevertheless, there is going to be a change as Suryoday Small Finance Bank is planning to include fixed deposits for a longer maturity period of 20 years. This new development could alter investor’s perception of long-term saving in the financial market.
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Current FD Options: This paper gives an overview of
For instance, the State Bank of India (SBI) currently offers an annuity deposit scheme with the terms of three, four five, six, seven, eight, nine, or ten years. In this scheme people pay a certain amount which is a lump sum then they are paid a fixed monthly amount which is a combination of both principal and interest. Nevertheless, most of the banks including the SBI have fixed deposit tenures of up to a maximum of 10 years, which means that long-term investment is not very favorable here.
A New Era of Fixed Deposits: Introduction of Suryoday SFB’s Initiative
Now Suryoday Small Finance Bank (SFB) is eyeing to break this 10-year barrier by offering FDs that can go up to 20 years of tenure. Currently, this product is under the test phase with the Bank as per the Managing Director & CEO of Suryoday SFB R Baskar Babu as the bank evaluates its long-term interest rate risks towards such commitments.
How will This 20 Year Fixed Deposit Work?
Suryoday SFB is planning to launch a new fixed deposit plan soon after the launch of which there would be special provisions for systematic withdrawal from the next 11 years only. This product will work on the same concept as any other annuity plans sold by the life insurance companies but will have a limited term.
Interest Rate Benchmarking: As we saw above, investors ought to expect the following while engaging in a business:
It is believed that the interest rate for this new FD product may correlate with the 10-year benchmark traded government security. This could serve as a better and more consistent return for long-term investors.
Why It Is Different from SBI’s Annuity Deposit Scheme
While SBI offered the annuity deposit scheme in which the deposit was to be paid just once, the scheme under Suryoday SFB will allow multiple monthly deposits in the first half of the total maturity period. In the second half or as a part of the reverse equated monthly installment, the bank will pay the monthly amount to the depositors.
Understanding Long-Term Fixed Deposits
Fixed deposits that normally take long periods, usually more than 5 to 10 years are termed as long-term fixed deposits. In India, standard long-term deposits have a provision of a maximum maturity period of 10 Years only. These longer durations attract higher interest rates although one may take higher interest rates from one bank to another.
What Is a 20-Year Fixed Deposit?
A fixed deposit is one of the latest investment opportunities that enable the investor to lock up his/her money for twenty years. This could provide greater remuneration and respond to the needs of people who need long-lasting financial motivation.
Final Thoughts
The company’s announcement of 20 20-year fixed deposit tenure is good news for long-term investors with Suryoday Small Finance Bank. When this product is out on the market, then it will offer an outlet for those who want to invest in a product that will help them to save money over a long period.
This new method of FD investment has the potential to change the long-term saving plans in India by at least presenting a new form of systematic withdrawals and High Yield Savings Account. The consumers should watch out for this product when it goes into the market having passed through the trial phase.
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