9.5% Interest From Unity Small Finance Bank On Fds, Are Small Finance Banks Safe?

Investors in fixed deposits are having a great time. Interest rates from small finance banks have soared and probably the most lucrative at the moment. Most of them come with even higher rates than bank deposits.

Unity Small Finance Bank: Interest rates of as much as 9.5% on fixed deposits

The maximum interest that one can earn from Unity Small Finance Bank is 9.5% for senior citizens and 9% for regular deposits. The above are for a tenure of 1001-days. The interest rates on the tenures differ, but, they come with a lower interest rates.

Are fixed deposits from small finance banks like Unity Small Finance Bank Safe?

Let's answer that question through a number of points. To begin the bank norms for small finance banks are regulated by the Reserve Bank of India. We can proudly say that our regulators have had stringent norms in place whether it is the RBI or SEBI. Secondly and most importantly we have not seen any small finance bank as such run into trouble. The last instance of trouble was largely with a cooperative bank and they in general have been having more troubles. Apart from that we have not had instances of collapse of commercial banks in India as well. Whenever a situation arises like Global Trust Bank or Yes Bank, the banks are taken-over or fresh capital pumped into these banks. The latest example being of DBS taking over Lakshmi Vilas Bank. So, in general there are has been some safety for these banks.

Thirdly, deposits are insured for a sum of Rs 5 lakhs, across the banking sector, so to that extent there is an amount related safety. The point we want to make here is if you are restricting yourself to that amount the money is safe.

Lastly, the promoters of Unity Small Finance Bank, which includes Centrum and Bharat pe and well established. So, we do not see any problems as such as the promoters are sound. Apart from this we believe that the interest rates are pretty decent, if you are restricting yourself to slightly lower deposits.