Recently IDBI Bank launched a new fixed deposits scheme, Floating Rate Term Deposit (FRTD). FRTD are very common in Europe and the US, but most of the consumers in India are unaware of any such product.
Unlike a regular fixed deposit, FRTD do not have a fixed interest rate. The interest rate depends on a certain benchmark. Like in case of IDBI bank's FRTD, the benchmark is quarterly average of 364 days T-bills auctioned by RBI. The bank offers a certain rate above the benchmark rate akin to the floating rates loan which are pegged on BPLR or Base Rates.
For instance the average of T-bills comes out to be 9.8%, and the bank offers 80 basis points above the benchmark for a deposit of 2 months. In that case, the bank would offer 10.6% interest, while if the average rate comes to 9.2% the interest earned would be 10%.
Consumers can open a FRTD with IDBI Bank by depositing minimum of Rs. 10,000 adding multiples of Rs.1000 up to Rs. 1 crore. The minimum lock in period would be 1 year, upto a maximum of 10 years. The bank is initially targeting HNIs for making the product popular.
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