AU Small Finance Bank, which was formed a little over two years ago, said it has started offering interest of 6.5% for its savings account holders with balance above Rs 1 lakh.
This makes the bank the only one to offer such a high interest rate on its savings account. The bank was earlier giving 6% interest on such accounts.
Small finance banks are so-called because they were upgraded from non-banking financial institutions and micro-finance institutions under a special license created by the Reserve Bank of India in 2015.
Interestingly, many large banks offer only around 6.5% interest on one-year fixed deposits.
Rival Kotak Mahindra Bank too offers a relatively high 6% interest on its savings accounts with deposits of more than Rs 1 lakh.
For deposits with average balance in excess of Rs 10 lakhs, AU Small Finance Bank will offer interest of Rs 6.75%.
It said these rates are the “highest among large Private Sector and PSU banks” in the country.
“Even within other small finance bank contemporaries, its rates have become further competitive,” it said.
The change is effective 11th April 2018.
The AU Small Finance Bank said it also offers monthly interest pay-out and extended banking hours.
“In our deposit book of around Rs 7,800 crores, purely saving account balances comprises around 23%,” said Sanjay Agrawal, MD & CEO of the bank.
“As a strategy, we want to increase this share more and more as it brings a multiplier effect and provides a lot of opportunities for cross-selling.
“We believe that by offering rates of 6.5% p.a. for balance between Rs. 1 – 10 Lacs and 6.75% for balance between 10 Lacs and 10 Crs, we will not only attractively price the customer’s deposit but also be able to lower our overall cost of funds.”
He said the bank added 71 banking correspondent outlets in the rural areas in March.
“We believe that increased branch network and attractive rates in savings account will accelerate greater financial inclusion of the unbanked and under-banked, and also enhance a higher savings tendency.”