I don’t understand this concept. Why keep 300000 in Savings account at 7% when you can keep it in FD at 8%
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the name of the bank says it all
With an sb ac you can get your cash anytime. No preclosure or penality. You are earning money on the float money that you keep in your SB account without any restriction on withdrawl. With a fd the tenor is fixed. You place the money for a specific tenor and cannot use it until u pre-close it and pay penalty. Nowadays banks wants to show high casa balance and hence give higher rate on sb account.
If you do not need the money for a predetermined time, then it is better to place it in FD with higher rate, however, if you want the money at short notice better to keep in SB account and earn a good return. The catch being, with a SB account, the interest rate can be changed anytime, this is true with FD as well. However, once the FD is booked, the rate remins fixed for the tenor of the deposit. When market falls and interest rate falls, the booked FD remains at the same rate.
Earlier banks used to pay very small rate for SB account and NIL for current account (which is true even today for corporates). This was their main funding source for banks to make money based on these low cost deposits. However, these small finance banks need to attract customers, hence they use this strategy. IDFC First was kind of the first who used to give 7% many years back. The strategy was to attract the customer. Generally customers who open a bank account will continue and they are sticky except for me. They think the procedure to move to another banks is herculean and hence will stay put and thereafter these banks will start reducing the rates. IDFC is not giving the highest rate now. They are well established and now slowly reducing these rates. They have a good number of NRI clients who are even more lazier to move from one bank to another.
Equitas Small Finance Bank - Listed Bank with a market cap of 9,726 cr.
On a market cap basis there are 12 banks on top of Equitas and there are 11 banks below Equitas Market Cap.
Net Profit was 574 Cr. Gross NPA was 2.76% and Net NPA was 1.21%
Capital adequacy ratio was 23.80
Out of their total business secured business is 81% and 19% is unsecured.
Out of the total industrywise distribution - 64% is for Retail and 26% is Vehicles.
Total deposits held is 25,380 cr (PY 18,950 cr).
AU is ranked 1 as small finance bank and Equitas is ranked 2. (This is as per google search - the parameters are various for grading).
Just wanted to put things into perspective. The data says it all.
DICGC covers customers deposit of Equitas and depositors of HDFC, SBI, Icici Bank, Kotak etc upto 5 lacks. No distinction. Interest paid on average by HDFC, etc is 3% on SB account whilst Equitas gives 5.25% on a tiered basis - 1 lack to 5 lacks. Over 5 Lack it is 7%. The color of money is the same whether it comes from Equitas or HDFC as long as there is no risk.
Suryoday another listed bank is offering 9% for select tenor. Why wouldnt I place an amount of 5 lack with this bank and gain the extra… Even this bank is guaranteed by DICGC. Even if it goes into moratorium, I can wait…until the DICGC pays up… Zero Risk, higher return, but need to run around and get the docs out to open an account.
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SB a/c also come with risk of frauds. You must have heard many cases where people get cheated and end up losing their entire bank balances. Most of them are due to carelessness of account holder itself but still risk is there.
The risk is there everywhere. Just cant find fault only for Banks. If you open your door and leave it someone will come and sock you and take what they can find. This is true even for your trading or anyother investment you do. If you wear a gold chain and walk in cubbon park bangalore, a cyclist will come and grab it and cycle away. All this is there in all aspects of life and not limited to Banks. Few thieves entered an house near our place, he found an old lady and did not have anything to take, he found the property title deed and he just tore it, cursed her and went away. 10 years ago or so, a friend of mine had parked the bike in his compound, someone jumped the wall, took out the petrol, (how I dont know), cut some pipe or so and went away. Car typres are stolen in Blore quite often. What to do. There is always risk in everything in India. The bloody mangoes are stolen from my tree in my compound. They even bring a stick with a knife at the end to cut it and pull it down from the tree. What can I do except shout at the top of my voice and use profanity from inside the house. They run away. Yeah you are right, there is risk…but not only for banks but for mangoes too.
What I find astounding, is when it comes to a Bank, all kinds of risk is thrown at it.
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I think you know about bank more than they know themselves or even RBI. 
When it comes to banking, its all about trust. PSU banks are offering 2.75 to 2.9% on SB a/c. Still they have 70% market share. This is inspite of the fact that they’ve bad reputation when it comes to service. Since 2017 I’m reading in various interviews by bankers like Kotak or Aditya Puri that in next 5 years the share will come down from 70 to 50% but still no effect.
Only reason is people believe there money is more safe at a PSU. They don’t believe in DICGC guarentees
It is like people know they have to invest in stock market to beat inflation but still they dont put a portion of their corpus thinking stock market is gambling.
Same thing.
It seems banks are more than happy with this change as it will increase their balance. Hope FD rates do not fall after this…
Overall interest rates should fall. It’s good for the market. Am sure you have good exposure to equities too. So it will nullify the effect.
I’m sure she is having some insider info about rates going down as predicted by @Gnome she knows about banks more than RBI and the bank themselves.
No impact on interest rates. Liquidity exercise this is. Flushes out some funds from real estate n inflows into banks, formal economy like cars, consumer discretionary goods and MARKETS too
Did not understand even one sentence of what you said in connection to what I said.
Sorry I just said due to demon 2.0 , there won’t be any impact on interest rates or FD rates for that matter
And I was saying I want interest rates to come down generally because Neha doesn’t want them to come down. I was just telling her even if they come down it won’t make any difference to her because her equity portfolio will nullify the effect.
Anyways. 
would likely only lead to another round of mass layoffs 
Very much needed. Since COVID, IT guys, especially fresh graduates, are getting abnormally high packages and are on cloud nine. Every tom, dick and harry is thinking himself to be an intellectual. They need a reality check.
I feel it will happen very soon irrespective of interest rates.
This seems like it’s specifically targeted at someone you know? 