State Bank of India is ready to give floating interest rates on term deposits.
The floating rate term deposit will not offer any assurance on returns, as the interest will vary with the alteration of base rates.
Hence if a depositor is looking for flexible returns, he can opt for the floating alternative, according to Central Bank of India executive director Arun Kaul.
He said, “Whether the product is beneficial for the customer, it is very difficult to say, as the rate would change with the revision in the benchmark, which is the base rate in this case”.
If the base rate is increased, the customer gains, but in case it falls, they end up losing more than a fixed rate product, he said.
SBI will introduce floating rate term deposit products connected to the base rate from 6th September.
Bank of India executive director M Narendra said, floating rate term deposits are a new product from SBI.
Whether other banks will introduce it or not will be decided by the success of this offering.
When asked if Bank of India will also introduce an equivalent product, he said, “We will look at it at appropriate time.”
A top official of another PSU bank said, “It is a complicated product. The customer has to be aware which way interest rate is going to go in the future and accordingly he has to take an informed decision, otherwise he may end up getting lesser returns than fixed rate products.”
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