Yes Bank launches FDs linked to repo rate


Mumbai-based Yes Bank on Tuesday launched a floating repo rate-linked term deposit which will be linked to the existing repo rate. The interest rates offered by the bank on the term deposits will automatically reset as per the applicable repo rate in the previous month.

The bank will offer a mark-up rate in addition to the existing repo rate. For deposits with tenure between a year and 18 months, the bank will offer a mark-up rate of 1.1% in addition to the repo rate, as per information on its website. For deposits maturing between 18 months and 3 years, the mark-up rate will be 1.6%. Currently, the repo rate stands at 4.90%. With this, the shorter term deposits will fetch an interest rate of 6% while the customers will receive 6.5% interest on the longer term deposits.

As of now, the interest rates of regular fixed deposits for similar tenures match interest rates of floating repo-rate linked deposits. Regular term deposits maturing in a year to 18 months receive an interest rate of 6% while regular term deposits maturing in 18 months and 3 years get an interest rate of 6.5%.

“Unlike a traditional Fixed Deposit (FD) where the interest rate stays the same throughout the tenure of the deposit, in this novel product the interest rate is linked to the prevailing repo rate,” the lender said.

The bank will accept a minimum deposit amount of Rs 10,000, with the tenure ranging from a year to less than 3 years. Senior citizens will get an additional 0.5% interest rate for deposits less than Rs 2 crore. The bank will also offer an overdraft facility on up to 90% of the principal value.

The move comes shortly after the Reserve Bank of India (RBI) raised the repo rate by 40 basis points (bps) in May and 50 bps in June on account of rising inflation. With analysts expecting the rising repo rate cycle to continue, the floating repo-rate linked cycle is likely to fetch more deposits for the lender. The bank’s total deposits in Q4FY22 stood at Rs 1.97 trillion, up 21% year-on-year. The bank opened 11.4 lakh current account, savings accounts (CASA) in FY22 compared to 6.6 lakh in the previous year. As of March 31, Yes Bank’s CASA ratio stood at 31.1% as against 26.1% in the last year.