A Floating Rate Fixed Deposit (FRFD) is a unique term deposit offered by Yes Bank that combines the safety and predictability of a traditional fixed deposit with the dynamic interest rate adjustments of a variable rate product. Here's a breakdown of its features:
Interest Rate:
Unlike a regular fixed deposit with a fixed interest rate throughout the term, the FRFD's interest rate fluctuates based on the prevailing Repo rate set by the Reserve Bank of India (RBI).
Yes Bank currently offers a mark-up of 1.10% on top of the prevailing Repo rate for FRFDs.
This means your interest rate will change every time the RBI revises the Repo rate.
Tenure:
You can choose an FRFD tenure between 1 year and 3 years.
Interest Payment:
You can choose to receive monthly, quarterly, or compounded quarterly interest payments.
Early Withdrawal:
Premature withdrawal from an FRFD is subject to penalty charges.
Additional Features:
Senior Citizens: An additional 0.50% interest rate for deposits less than INR 2 Crore and up to 0.45% for deposits between INR 2 Crore and less than INR 5 Crore.
Sweep-Out Facility: You can link your savings account to your FRFD and automatically transfer any unutilized balance in your savings account to your FRFD for higher returns.
YES Rewards: Earn YES Reward points on booking your FD online.
Benefits of FRFD:
Potential for higher returns: If the Repo rate increases, your FRFD interest rate will also increase, potentially giving you higher returns than a regular fixed deposit.
Predictability: Unlike pure variable rate products, you have a buffer against significant interest rate drops because of the markup applied by Yes Bank.
Safety: Your deposit is still insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) up to INR 5 lakhs.
Who might benefit from an FRFD?
Investors with a medium-term investment horizon who are comfortable with some interest rate fluctuations.
Investors who believe that interest rates might rise in the future.
Investors who want to benefit from the safety and predictability of a fixed deposit while also having the potential for higher returns.
Before deciding on an FRFD, it's important to compare it with other available investment options and carefully consider your risk tolerance and investment goals.
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