Innovative idbi Bank deposit scheme offers variable rate

OUR SPECIAL CORRESPONDENT

Malla: Rate rejig

Mumbai, Aug. 22: State-owned lender IDBI Bank today launched a floating rate term deposit scheme in which the interest rate will be pegged to the average yield of the 364-day treasury bill of the government.

Interest rate for the new product will be reset every quarter. The minimum amount of deposit will be Rs 10,000 and in multiples of Rs 1,000 thereafter. The maximum investment is capped at Rs 1 crore as this is the definitional threshold for a retail deposit. Further, the floating rate deposit will have a lock-in period of one year and it will be accepted in six maturity slabs, ranging from 1 to 10 years.

According to IDBI Bank, customers can switch from fixed to floating rate term deposits by closing the former at the originally contracted rate, without any premature penalty, subject to certain conditions. While it did not elaborate on these conditions, the bank went on to add that customers will not be allowed to convert floating to fixed rate deposits. However, customers can take a loan or overdraft against the floating rate deposit, a facility that is considered standard for fixed rate deposits.

The bank is the first to introduce such a product after the RBI recently asked lenders to look at such an offering so that there is an effective transmission of monetary policy changes.

IDBI Bank said the scheme would appeal to the retail investors who borrow at floating rates (such as home loans) but invest at a fixed rate, and are therefore exposed to rate risks.

The floating rate deposit will ensure that loans and deposits move in tandem and, therefore, help to partially protect the customers’ asset-liability portfolio from such risks. The bank said in a rising interest rate scenario, customers generally go in for short-term deposits and keep rebooking them as rates move up. These deposits would help to do away with this cumbersome process.

“With the rise in financially literate strata of society, innovation and customer satisfaction have become the key differentiators. Our bank’s floating rate deposit product would allow our customers to take advantage of interest rate changes without closing and rebooking their fixed deposit,” said R.M. Malla, chairman and managing director of IDBI Bank.

But will this product fly?

Past experience shows that the bank could find it hard to drum up a good response. Lenders such as the SBI have experimented with such a product in the past. However, the customer response was tepid and these schemes were eventually withdrawn. In 2010, the SBI had come out with a similar product where the interest rate was linked to its base rate. The base rate is the minimum lending rate, which banks must charge to their customers.

“Such products work fine in a rising interest rate environment. However, we are now in a stage where interest rates have nearly peaked. Customers could therefore be wary of putting their money in such a scheme,” said a senior banker who did not wish to be identified.

“Moreover, the psyche of our depositors is that they prefer fixed and assured returns. Such a product brings about some uncertainty. Many customers, particularly the retired people, may not be comfortable with it,” he said.[18]

Ten Likely Scenarios for Rising Deposit Rates Once deposit rates start rising this year, the banking industry will incur relatively high interest expense due to the inelasticity of consumer deposits in a rising-rate environment.BY DAN GELLER Feb 11, 2014  |  0 Comments

The question about rising deposit rates is not “if” but when and to what degree they will rise. The timing of the rise in rates is relatively easy to project because rates are dependent on economic conditions. From a macro perspective, we are likely to see gradual and sustained improvement in the economy in 2014, provided, of course, that no unexpected or highly unlikely event occurs.

Among the many signs of improvement in the economy, I will mention just one significant factor that is very likely to impact rates. Personal consumption, which makes up about 70% of gross domestic product (GDP), gradually improved throughout 2013. In the first quarter of 2013, it increased 1.1% over the previous quarter, 2.5% in the second quarter and 4.1% in the third quarter. Simply put, this means that consumers are spending much more, which leads to an increase in economic activities and borrowing.

In the absence of a crystal ball, the only way to develop likely scenarios of rising rates is to analyze previous occurrences and study their behavior. The 10 likely scenarios described below derive from our analysis based on the behavior of deposit rates during the last rising-rate cycle, from July 2003 to July 2007:

1. Once rates start rising this year and beyond, the banking industry will face relatively higher interest expense per-deposit dollar due to the inelasticity of consumer deposits. This means that in order to maintain or increase balances, banks will have to increase rates at a greater pace than the increase in balances.

2. During the rising rate period, the largest percentage gain in deposit balances is likely to be in money market accounts (MMDA) while the largest percentage decrease in balances is likely to be in checking accounts.

3. Rates of term accounts are projected to increase in a general linear pattern with minor hiccups, which is easier to project and budget.

4. Rates of liquid accounts are projected to increase in a general down-curved pattern, which makes it harder to project and budget.

5. The increase in rates of deposit products is going to be moderate, gradual and volatile, which will require constant monitoring of the competitive set.

6. Deposit rates are not likely to exhibit big jumps month over month.

7. Whether rates increase in a general linear or curved pattern, rates of all deposit products are likely to fluctuate throughout the rising-rate period.

8. Expect national average rate increases to range from one-half to one basis point per month per product. There will be noticeable variations among the regions.

9. Predictors of rising deposit rates vary by product and include the Fed fund effective rate, the 3-month and the 6-month LIBOR rates.

10. Since the starting point of the rate increases, i.e. current rates, is so low, it will take much longer for deposit rates to reach their pre-recession level.

The above scenarios should serve as a roadmap for rising rates. Institutions should start budgeting higher interest expense and plan for a shift in product balances in accordance with the complete analysis. Not being prepared for rising rates is no longer an option.

Mr. Geller is the executive vice president of San Anselmo, Calif.-based Market Rates Insight, which provides competitive research and analytics to financial institutions. He can be reached at dan.geller@marketratesinsight.com.[19]

Deposit Strategy in a Rising Rate Environment  Although deposit rates traditionally lag in a rising rate cycle, the next cycle may be different, putting pressure on banks to improve their deposit pricing skills now.BY RICHARD SOLOMON, ADAM STOCKTON AND SHERIEF MELEIS Nov 12, 2013  |  3 Comments

The banking industry has anxiously awaited a rising rate environment, anticipating that interest income from loans and investments will rise more quickly than interest expense on deposits and other funding. Sure that deposit rates will lag industry-wide, many banks believe they can win by simply coasting with market trends.

But much has changed since the last rate cycle, in particular the competition from direct banks, and the coming era may present a more complex and challenging setting for deposit pricing. And while Novantas research confirms a strong industry trend of lagging deposit rates in prior cycles, institutional performance was widely dispersed, with some banks faring far better than others.

As the Fed Funds rate rose by 422 basis points from the summer of 2004 to the fall of 2006, the most aggressively priced banks saw their cost of deposits increase by 329 basis points. By contrast, top performing banks saw an increase of only 140 basis points, capturing a funding advantage of 45 basis points per every 100 basis-point increase in the Fed Funds rate (see chart, “Differences in Market Sensitivity”).

This is a huge difference when extended across multi-billion dollar deposit portfolios, and less-prepared banks could be further handicapped in the next rate cycle. The customary shift to higher-yielding certificates of deposit may be much more pronounced, leaving far less time for coping strategies than bankers have come to expect.

Rates in Motion

While the exact timing of the next upward rate cycle remains unclear, banks are definitely running out of time to prepare. Long-term interest rate swaps have already begun to rise from last year’s historic lows. And long-term CD rates have followed in some markets, showing the beginnings of a typical rising rate pattern.

Short-term rates will likely not begin to rise until after the Fed begins to taper quantitative easing, but this event may occur early in 2014. The next rate environment may be quite different for several reasons, and there are positive and negative factors that will impact banks’ ability to capture any net interest margin improvement. Among the negative factors:

• Compared with 2006, the Internet has become a much more powerful force in banking. This includes competition from direct banks, the advent of digital shopping for banking products, and the dwindling potential for customer engagement within the branch. While direct banks still have about a 5% market share of deposits, Novantas research suggests as many as 60% of customers shop online before they buy. Even for those customers who ultimately choose a traditional bank, direct banks increasingly influence shopping expectations, spurring rate competition.

• The erosion of branch traffic will make it more difficult to stem impending defection among established accounts. In prior rising rate cycles, a typical strategy to save high-value customers and large balances included “back pocket” or “desk drawer” offers, extended by branch and contact center reps empowered to offer a promotional rate to customers who threaten attrition. This technique will be less available to banks as more web and mobile customers “silently attrite” without a conversation with a bank rep.

• Pent-up rate hunger among depositors may unleash more of a shopping surge than what might have been seen before. Customers have struggled through a long era of depressed rates and have had little motivation to look around. But their appetites could easily be rekindled in a shopping event prompted by rising rates, accompanied by market excitement and heavy advertising from institutions needing to grow deposits.

• Core deposits are valued more highly following the liquidity crisis, both by regulators and bankers, suggesting more aggressive competition for retail deposits.

Among the positive factors:

• Retail banking returns are limping (down from 30+% pre-crisis) and banks are hungry to replace lost revenue, collectively incenting institutions to lag more aggressively.

• Novantas analysis suggests the biggest driver of deposit price competition is loan growth, and if the tepid recovery in credit continues, most banks will have less motivation to aggressively compete (However, those institutions with growing loan portfolios may be far more aggressive than the average bank).

• Typically in a rising rate environment, money flows out of deposits into money market mutual funds, but recent regulatory changes and the “breaking of the buck” issue have rendered money market mutual funds less attractive.

In combination, all of these factors will likely lead to a barbell effect as aggressive high-rate competitors clash with overall industry efforts to lag.

Market Imperatives

In this environment, pricing skills will be critical, including precision, planning and execution. Banks caught flat-footed could find themselves paying extra to replace balances that otherwise might have been retained at lower cost.

Precision. Banks will need to be able to gather rate-sensitive funds without repricing the entire book of business and giving up substantial margin. Regional pricing strategies (which were less critical in the low-rate environment) will be important again. Different markets exhibit substantially different competitive conditions, and banks will need the flexibility to react on a market-by-market basis (see chart, “Regional and Product Variations”).

But regional pricing skills will provide only part of the answer in the upcoming cycle. Technology and analytics have evolved to enable segment- and even customer-targeted pricing as well. Banks will need to identify and target those customers who are most likely to respond to rate offers and continue a pricing paradigm after account acquisition to make informed tradeoffs between balance formation and margin enhancement.

These customer-level techniques, similar to those practiced in the credit card industry for decades, had been viewed as inapplicable in traditional branch banking, which has struggled to deploy finely differentiated offers at the point of sale. But they are increasingly feasible in a “direct-to-consumer” world where more sales and account renewals are conducted electronically via online and mobile channels.

Planning. Banks can no longer rely on the periodic deliberations of executive committees to set deposit pricing. Given the rising need for quick responsiveness to a more electronically-driven market, the bank needs a set of flexible plans that are responsive to varied scenarios, considering funding needs and market conditions.

On the strength of this preparation, rate offers can change on a daily basis if needed, yet remain within the bank’s overall pricing framework. This allows for maximum responsiveness without placing undue burdens on executive time.

Execution. Banks will need to develop and test field capabilities before the rates rise in earnest. The analytic insights developed at headquarters need to be translated into a set of specific actions to be taken across the various regions, distribution channels and customer groups.

During the recent lull, some institutions have delayed investing in important capabilities, for example, customer level pricing analytics and delivery capabilities. They may be caught off-guard when the market moves, given that it takes time to fully implement these capabilities, including technology build, testing and rollout. Other banks have the capabilities but have not used them in a number of years, leaving institutions unsure of their potential effectiveness and the magnitude of customer reaction.

While a Fed Funds increase may be delayed, long-term rates often begin to rise well in advance. Coping difficulties in the prior rising rate cycle contributed to a dramatic performance gap, and the skews could be even wider next time around, given the new complexities of online competition and engaging the multi-channel customer. Winners will prevail on the strength of preparations underway now.

Mr. Solomon is a managing director, Mr. Stockton is a principal and Mr. Meleis is a managing director in the New York headquarters of Novantas Inc., a management consultancy. They can be reached atrsolomon@novantas.com, astockton@novantas.com and smeleis@novantas.com respectively.[20]

3.2 Инновационные депозитные продукты как инструмент развития клиентских отношений банка и повышения эффективности его деятельности

Наши северные соседи шагнули еще дальше. Они придумали, как в условиях снижающихся ставок по банковским депозитам повысить интерес вкладчиков к своим продуктам и начали предлагать «синтезированные» вклады, включающие инвестиционную составляющую — инвестиционные и индексируемые депозиты. Потенциально они могут показывать большую доходность по сравнению с «обычными» вкладами. Правда, особой популярностью новые банковские продукты у инвесторов пока не пользуются.

Индексируемый депозит подразумевает, что доходность вложений не фиксирована, а привязана к определенному инструменту — стоимости товаров, фондовому индексу, инвестиционному фонду и т. д. Подобный продукт сейчас в России предлагают всего несколько банков. Например, один из российских банков начал привлекать средства вкладчиков на депозиты, доходность по которым зависит от динамики цен на нефть и изменения индекса РТС.

Так, если клиент вложил деньги на полгода, и за этот срок индекс не вырос, то банк вернет деньги с минимальной процентной ставкой 0,1%. Однако если индекс покажет рост, скажем, на 12,9%, то максимальная доходность по депозиту будет около 26%. Таким образом, вкладчик может заработать значительную доходность либо не получить прибыли вообще. Единственный риск, который несет инвестор, воспользовавшийся таким депозитом, это недополучение дохода. А от потери средств вкладчик застрахован за счет того, что банк использует опционную стратегию.

В отличие от индексируемого депозита, инвестиционный депозит подразумевает, что часть суммы, полученной банком от вкладчика, инвестируется в инструменты фондового рынка. При этом схема инвестиций и инструментарий могут быть различными, однако, как правило, речь идет об инвестициях части активов клиента в ценные бумаги. Это гарантированная ставка доходности, которую предлагает компания и, кроме того, инвестор может рассчитывать на рост стоимости портфеля ценных бумаг, а также дополнительный доход за счет выплаты дивидендов.

По сути, речь идет о предложении двух различных продуктов (банковского депозита и паев ПИФов) в одной «упаковке», за что банки готовы нести дополнительные расходы в виде повышенных ставок. Соответственно, клиент разделяет все те риски, которые несут вкладчики банков и пайщики инвестфондов. Но за счет того, что речь всё-таки идет о разных продуктах, риск диверсифицирован. Кроме того, за счет повышенного дохода по вкладу инвестор может компенсировать скидку при продаже паев ПИФа или возможные убытки, если стоимость пая пошла вниз.

Так что нет предела совершенству. Предложений много и они интересны. К сожалению, не все банки относятся к клиенту с должным уважением, но, к счастью, мы можем выбирать.

Banc of California Preferred is a membership-banking program managed by our Office of the President. Preferred membership entitles you to front-of-the-line access, unlimited house calls and notary services; a dedicated team to streamline residential, commercial and business lending; and a discount for mortgages.

The Preferred Account

Preferred Membership entitles you to a single interest-bearing business or personal checking account that eliminates the need to open multiple accounts, lock up your money in a time deposit, or worry about overdrafts. And, of course, you will receive our best rates.

Office of the President

The Office of the President is designed to provide concierge service to our Preferred banking clients, and to simplify the banking experience by eliminating red tape. Built upon the bank’s service culture of Building Excellence, the Office of the President ensures that our customers will always enjoy an exceptional level of service.

Name The Day Certificate of Deposit

Our Name The Day Certificate of Deposit allows you to choose your maturity date, maximize your returns, and minimize rollovers. So, for example, if the escrow on your new house or large equipment purchase closes April 19, you can name that day as your maturity date and collect the maximum interest.[17]

Продумать продукт - зарплатные депозит

Список использованных истоников:

1. http://slovari.yandex.ru/политика%20это/БСЭ/Политика/

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3. 3.Андрушків Т. Депозитна політика комерційного банку та напрями її вдосконалення в умовах економічної кризи / Т. Андрушків // Українська наука: минуле, сучасне, майбутнє. – Тернопіль : Економічна думка ТНЕУ, 2012. – Вип. 17. – С. 3–13.

4. О банках и банковской деятельности” от 07.12.2000 г. № 2121-Ш;

5. Дані фінансової звітності банків України на 01.01.2014 http://bank.gov.ua/control/uk/publish/category?cat_id=64097

6. Алехин Б. Есть ли в России рынок ценных бумаг //РЦБ. –2001. –№23. –С. 27 – 31.

7. Р. А. Герасименко, Е. И. Хорошева,В. В. Герасименко, ДЕПОЗИТНАЯ ПОЛИТИКА БАНКОВ И ФАКТОРЫ,ВЛИЯЮЩИЕ НА ЕЕ ФОРМИРОВАНИЕ - Финансы, учет, банки. Выпуск № 141 1 (17) 2011

8. http://www.ukrinform.ua/ukr/news/skladeno_reyting_naystiykishih_bankiv_ukraiini_1859115

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10. http://www.aval.ua/ru/about/

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12. ОЦЕНКА ЭФФЕКТИВНОСТИ ДЕПОЗИТНОЙ ПОЛИТИКИ КОММЕРЧЕСКИМ БАНКОМ. Московец Е.С., Л.А. Мочалова. ПОЛЗУНОВСКИЙ АЛЬМАНАХ №3 2009 ТОМ 2, стор. 255

13. Аналітичний огляд банків України. Депозити. 2013 December. - Bankografo.com

14. Банковское дело: стратегическое руководство / Под ред. В. Платонова, М. Хиггинса. – М.: КонсалтБанкир, 2001. – 429 с.

15. Постанова НБУ вiд18.06.2003 N 255 « Про затвердження Правил бухгалтерського обліку доходів і витрат банків України» з доповненнями та змiнами вiд 08.10.2010.

16. http://www.banki-delo.ru/2010/01/процентная-маржа/

17. https://www.bancofcal.com/banking/

18. http://www.telegraphindia.com/1120823/jsp/business/story_15886015.jsp#.UznOTiqAc3w

19. http://www.bai.org/bankingstrategies/Product-Management/Deposit-Products/Ten-Likely-Scenarios-for-Rising-Deposit-Rates

20. http://www.bai.org/bankingstrategies/Product-Management/Deposit-Products/Deposit-Strategy-in-a-Rising-Rate-Environment

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