In the post-pandemic era, financial well-being has received increased attention. However, there aren't many investment options available with risk-free and guaranteed returns other than Fixed Deposits (FDs). Private sector lender Yes Bank is among the few banks in India that offers floating FDs with interest rates up to 8.35%.
Yes Bank Floating Fixed Deposit
The Yes Bank's Floating Rate FD has a variable interest rate that fluctuates based on the current repo rate i.e. 6.25%. The RBI increased the REPO rate 5 times since mid-2022. With the floating FD, the FD will add a markup above the current repo rate, and that is the interest rate it will give you. In the event of a rise in the REPO rate, the effective interest rate will also rise; conversely, a fall in the REPO rate will result in a fall in the effective interest rate of the Floating Rate Fixed Deposit. The markup rate is the additional rate of interest offered by the bank over and above the base rate which is the REPO rate in this case.
According to Yes Bank, the key features of the floating FD are, "Benchmarked to REPO rate, offering you a floating rate of interest. Maximize your returns by taking advantage of the dynamic interest rate. Automatic reset of the interest rate monthly as per the applicable REPO rate in previous month. Enjoy liquidity with an Overdraft facility on your FD. Minimum deposit amount as low as INR 10,000. Flexibility of choosing your tenure from 1 year to less than 3 years. Senior Citizens get an additional 0.50% interest rate for value less than INR 2 Crore & up to 0.45% for value of INR 2 Crore to less than INR 5 Crore. Enjoy liquidity with OD up to 90% of the principal value. Only reinvestment option available with payout at maturity. Only available for Resident Individuals & Non-Individuals. Premature withdrawal available with applicable penalty."
General Public - Interest Rates Applicable
The rates are applicable For the general public on deposits more than Rs 10,000 to less than Ra 5,00,00,000. The 6.25% repo rate is effective from 1 January 2023.
|Tenure||REPO Rate||Mark-up rate*||Rate of Interest|
|1 Year to < 18 Months||6.25%||1.10%||7.35%|
|18 Months to < 3 Years||6.25%||1.60%||7.85%|
Senior Citizen Benefits
1. The below rates are applicable on deposits more than Rs 10,000 to less than Rs 2 Cr.
|1 Year to less than 36 months||0.50%|
2. The below rates are applicable on deposits more than Rs 2 Cr to less than Rs 5 Cr.
|1 Year to less than 18 months||0.45%|
|18 months to less than 36 months||0.25%|
Note - The bank will charge a certain percent as a penalty for the premature withdrawal of certain tenure FDs. These Penalty are as follows for the tenure of FDs:
|Tenure of Fixed Deposit||Penalty Rate|
|7 days to 90 days||3.00%|
|91 days to 181 days||2.50%|
|182 days and < 12 months||2.00%|
|12 months to < 36 months||1.00%|
Source - Yesbank.in
Why should you invest in Floating FDs?
A significant drawback of a bank fixed deposit (FD) is that current FD investors are not benefited from later interest rate increases. Whereas, the investment returns for floating rate FDs are determined by the repo rate set by the RBI. The interest rates that apply to a floating rate fixed deposit are tied to the current repo rate, as opposed to a conventional fixed deposit (FD), where the interest rate is fixed for the life of the deposit. This makes the floating FD more attractive compared to the regular FDs.