IDBI Bank introduces floating interest rate on retail term deposits

IDBI Bank today introduced a floating rate interest on retail term deposit (FRTD). The product is a variant of fixed deposits, wherein the rate of interest is not fixed for the entire tenor of the deposit, but moves in tandem with a reference rate, which is periodically reset.

The interest rate is anchored to a market-based rupee benchmark rate ie average yield at 364-Days treasury bills auctions undertaken by RBI during the preceding three months. The interest would be reset every calendar quarter.

"This is intended to help the customer leverage the upside of an increase in interest rates and also hedge floating rate borrowings," the bank said in a statement.

The minimum amount of deposit is Rs10,000 and thereafter in multiples of Rs1,000 with a cap of Rs1 crore, coinciding with the definitional threshold of a retail deposit.

The FRTD would have a lock-in period of one year and would be accepted in six maturity slabs, ranging from one year to ten years, the bank said.

Customers can switch from fixed to floating interest rate term deposits by closing the former at the originally contracted rate, without any premature penalty, subject to certain conditions. However, no conversion of floating to fixed rate is permitted. As in the case of fixed rate deposits, one can avail a loan / overdraft against the FRTD also.