Private lender Yes bank on Tuesday announced the introduction of floating-rate fixed deposits for the bank’s domestic customers with the rate of interest linked to the benchmark repo rate.

The bank said in a statement that the floating rate fixed deposit will offer the investors both the safety of fixed deposits as well as dynamic returns being linked to repo rate published by the Reserve Bank of India.

The floating FD can be availed for a tenure of 1 year to less than 3 years. Over a current repo rate of 4.9 per cent, the bank will add a mark-up rate raging between 1.1 per cent and 1.6 per cent leading to a final rate in the range of 6-6.5 per cent for the set tenures (see chart). The markup rate is the additional rate of interest offered by the bank over and above the benchmark.

The interest rates will be reset on the first day of every month subject to change in repo rate. This means that whenever the repo rate will increase, the bank will automatically pass on the additional interest rate to the account holder and whenever the rate will decrease, the interest rate of the account holder will decrease.

According to industry officials, the benefit could be twofold for the bank. RBI is widely expected to increase the repo rate amid rising inflation. Already the regulator has hiked the repo rate by 90 basis points in two tranches and further hikes are expected during the ongoing financial year. The bank will be able to garner more deposits in a rising interest rate market as well as the transmission of rates will be immediate, without the depositors having to wait till maturity.

“One of the main advantages of this product is that the revision on the interest rate will happen automatically and will not require manual intervention by the bank or the customers. There has been careful deliberation and thought behind the launch of this floating rate FD and it is another step towards further enhancing our retail product offering,” said Prashant Kumar, MD and CEO, Yes Bank.

Yes Bank’s deposit base as of March 31, 2022, was Rs 197,192 crore, up from Rs 162,947 crore on March 31, 2021. Term deposits at Rs 135,832 crore as of March 31, 2022 has seen a year-on-year growth of 13 per cent.

Appointment

The bank also announced the appointment of Dheeraj Sanghi as the country head - branch banking. He would be reporting to Rajan Pental - global head, retail banking, Yes Bank. Sanghi in his previous role was the chief business officer at Paytm.