ESAF Fixed Deposit Schemes – Should you invest?
When banks are reducing fixed deposit interest rates quarter on quarter, ESAF (which is small finance bank) is offering Fixed Deposits upto 9% Interest rates. Debt mutual funds provide 8% to 10% returns, however they are not guaranteed. Hence ESAF Fixed deposit scheme which are offering high returns are attracting investors now. What is ESAF Small Finance Bank? What are the features of the ESAF Fixed Deposit Schemes which are offering 9% interest rates? What are the risk factors one should consider before investing in such FD Schemes? This post is based on comment from one of our reader on one of the article to provide a detailed analysis.
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What Small Finance Banks (SFB) does?
In order to associate the section of economy which was not served by other banks like small business units, small and marginal farmers, unorganized sector entities, micro and small industries, the concept of small finance bank was introduced.
These banks do basic banking activities like acceptance of deposits and lending of funds to the unserved and underserved section of the society.
It can also undertake small financial services activities like distribution of mutual funds units, insurance products, pension products etc. with the prior approval of the RBI and after complying with all the sectoral regulations.
About ESAF Small Finance Bank
ESAF is one such Small Finance Bank that has attained provisional license for the RBI. It is a new age social bank that primarily focuses on expanding the banking horizon to new unbanked areas.
The bank offers all the products like current account, saving account etc.
The interest rates of regular FD account of ESAF offers very attractive returns.
Both regular FD and tax saver FD Account are available to choose from.
Features of ESAF Fixed Deposit Schemes
The following are the key features of ESAF Fixed Deposit (FD) scheme:
The regular FD is available for tenure of minimum of 7 days to a maximum of 10 years.
The Tax saver FD is available for tenure of 5 years to 10 years.
There is differential interest rate for senior citizens and also on deposition above Rs. 1 Cr.
The interest pay-out frequency is quarterly. If one requests for monthly pay-out of interest, it is paid at discounted rate.’
Joint account and nomination facility available.
The option of reinvestment and auto renewal facility available.
Premature closure of FD is for regular FD account but in case of Tax Saver FD, premature closure is not allowed.
What is the Minimum and maximum deposits and duration of the scheme?
For regular FD: The minimum deposit is Rs 1,000 and further depositions can be made in the multiples of Rs 1,000 only. The maximum investment that can be made in ESAF FD is Rs. 1 Crore. The minimum tenure of FD is for 7 days and the maximum is 10 years. The interest rates vary with the variation in duration for which the FD has been made.
For Tax Saver FD: A minimum of Rs 1,000 can be deposited to a maximum of Rs 1.5 Lakh per annum. Deposits can be made in the multiples of Rs 100 and the tenure available to them is 5 years to 10 years.
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What are the interest rates of ESAF Fixed Deposit Schemes?
Here are the Interest Rates of ESAF FD Scheme which offers upto 9% interest.
Can NRIs apply for this FD?
Yes, NRIs can also apply for this FD scheme but the tenure available to them is from 1 year to 10 years.
What about SB account features and interest?
ESAF bank offers saving account to all categories of customers designed to suit their needs. There are separate accounts for senior citizens, Pradhan Mantri Jan Dhan Yojana (PMJY) females and students.
The minimum initial pay varies in each account. The bank provides the facility of free unlimited cash deposits and withdrawals at the base branch and for non base branches this limit is Rs. 50,000 per day. The rates of interest for regular and senior citizens are same. ESAF Savings Bank Interest Rates are as follows:
Upto 1 lakh – 6.00%
Above 1 lakh upto 10 lakh – 6.5%
Above 10 lakh (for incremental amount above Rs 10lakh) – 7%
Some of the FAQs of ESAF FD Scheme
1) What are the documents required to open a regular senior citizen fixed deposit account?
The customer needs to provide proof of age to confirm that he/she is a senior citizen. There are number of documents that act as a proof of age like Secondary school Leaving Certificate, LIC policy, Voter ID, Passport, Pan card etc.
2) When is TDS deducted for regular FD?
TDS is deducted the bank pays or reinvests interest during a financial year. Interest accrued but not yet paid is also included in it. The TDS certificate, Form 26A, is issued in the next month of the respective quarter.
3) Will changes in my deposit portfolio have an impact on TDS liability?
Yes, if the change or enhancement in the deposit portfolio earns a cumulative interest along with that of the earlier portfolio greater than Rs. 10,000, you will be liable for TDS on your current portfolio.
How safe is ESAF FD scheme?
ESAF Small Finance Bank is among the first five out of the 10 licenses which got permission from RBI in August 2015. The bank is eyeing to double its balance sheet to Rs. 5,000 crore by the end of fiscal 2018.
With the bank growing so strongly, I could not see any problem in placing trust in it and investing in the scheme.
Should you opt for ESAF offering 9% interest?
Fixed Deposit is one of the safest investment options that provides fixed returns. The interest rates have fallen to a new low in the year 2017 with RBI reducing monetary policy rates. The banks follow this subsequently and bring the rates down for deposits. In such scenario, only few Small Finance Banks are offering 9% interest on FD as these banks are new to the market. So, one should grab the opportunity of high interest rates without any problem.
Before investing, an investor take the following point into consideration, offered interest rate, tenure, rating, medium of investment and liquidity.
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ESAF Fixed Deposit Schemes – Should you invest
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