POSTED BY October 2, 2012 7:49 pm COMMENTS (2)ON
I have been reader of this since sometime. I would like appreciate Manish for sharing his knowledge. I have question regarding FD
1. I have noticed that IDBI has better interest rates compared to SBI, just wondering why IDBI offers more interest where as SBI offers low ? can you suggest me which bank I can go for FD of 1L and why ? I have an savings account with SBI but not with IDBI.
2. Does anyone share your bank experince with IDBI in Bangalore ?
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2 replies on this article “IDBI Fixed deposit , do you recommend it ?”
Hi Lame investor,
Thanks a lot for such a detailed response. I was little concerned about safety since this bank is offering higher interest rates compared to other nationalized banks.
Do you have any comments, I’m vivid reader of blog. I hope you will respond to this post with your comments.
I am not an expert on this, but trying to answer your question.
1) For a long time now, RBI has given all the freedom to indian banks to decide the interests rates on their own. (http://www.rbi.org.in/scripts/FAQView.aspx?Id=52). However these are indirectly controlled by RBI as it decided the CRR, repo rate, bank rate. Not to go in details, but in brief, the rbi mandates all the banks to keep a specified % of their money with rbi. It decides the rate at which it lends money to commercial banks.
So depending on the above and banks general policy, the rates are decided. Eg- If the banks want to attract more deposits it will have higher deposit rates to attract customers. Nationalised banks are more people centric as they are owned by govt where as the commercial banks are more profit centric.
( There have been instances where banks have gone bankrupt due to incorrect rates)
2) IDBI is a nationalised bank ( govt bank ). Considered to be one of the most safe category. It has a robust online banking system ( rare among nationalised banks, though there are a few others like SBI). It has numerous branches all over india after it took over some banks like united western.It has some other good products like sweep in accounts.
3) Either ways a sum of 1L is insured under DICGC. (http://www.rbi.org.in/scripts/FAQView.aspx?Id=64). It means that every bank insures a sum of 1L per depositor.
Eg- If someone has 2 L in fixed and the bank goes bankrupt, you are only 1L is insured. So ideally its better to keep 1L only in every bank… But thats toooo pessimist.
4) Your observation is correct. IDBI has had a higher rate of interest for past 5-6 years than other banks and my personal experience with the bank is extremely good.
5) Also to reiterate, it is a nationalised banks…. Which means that govt has 50%+ stakes and one of the most safe avenues considered.