Microlenders Suryoday and Utkarsh, which started small finance banks (SFBs) on Monday, are offering interest rates of more than 6% in a bid to compete with commercial lenders for savings bank deposits. Most commercial banks offer 4% on savings accounts, barring a few such as Kotak Mahindra Bank, YES Bank and IndusInd Bank.
Suryoday, based in Navi Mumbai, will offer 6.25% for deposits of up to ₹1 lakh and 7.25% for those between ₹1 lakh and ₹10 lakh. For deposits more than ₹10 lakh, it will pay 7%, R Baskar Babu, co-founder and chief executive officer of Suryoday Small Finance Bank, told The Hindu .
Varanasi-based Utkarsh Small Finance Bank will offer 6% for savings bank deposits across the board, said chief financial officer Abhishek Kumar.
“We did a soft launch by offering services to our employees,” Mr. Kumar said, adding the full-fledged unveiling will be in April. “We have started with 5 branches, 2 in Varanasi and one each in Delhi, Patna and Nagpur.”
Suryoday, which started with a branch in Belapur, will raise branch presence to four in the next 7-10 days. The lender plans to convert all its 220 microfinance branches by March 2018.
“We are starting with a loan book of ₹1,000 crore,” Mr. Babu said, explaining that the MFI had transferred its loan book to the bank. “We want to grow our loan book to ₹1,400 crore by March 2018, with a deposit base is ₹350 crore,” he said. The net worth of the lender is ₹350 crore while capital adequacy ratio is 30%.
While the new banks are offering higher rates on savings deposits, their lending rates would also be higher than those of commercial banks. The marginal cost of funds based lending rate (MCLR) for Suryoday would be 17.5%, while for Utkarsh it would be 14.5%. The MCLR for most commercial banks is about 8.5-9.5%.
“We will try to bring it down to 14% over the next couple of months,” Mr. Babu said, adding it was likely to settle at about 12% in a year.
