Sundaram Finance Increases Fixed Deposit Rates to 8% Yield
Non-banking lender adjusts deposit tenures following recent central bank repo rate hike.
1Revised Interest Rate Structure
Sundaram Finance Limited announced an interest rate hike across multiple fixed deposit tenures effective October 16, 2026. The company increased one-year deposit rates by 30 basis points, while two-year and three-year tenures saw a 25 basis point rise. These adjustments apply to both regular depositors and senior citizens seeking stable investment returns.
2Senior Citizen Yield Advantage
Senior citizens benefit from preferential pricing compared to regular depositors under the new structure. The interest rate for three-year deposits now reaches 8% per annum for this demographic. Regular depositors see their one-year rate climb from 6.70% to 7%, reflecting the company's strategy to attract liquidity through competitive yield offerings.
3Context of Repo Rate Hike
This revision follows the Reserve Bank of India's decision on October 7 to raise the repo rate by 25 basis points to 5.50%. This marks the first such increase since February 2023, directly impacting the cost of borrowing and influencing how financial institutions like Sundaram Finance manage their internal funding requirements.
4Market Competitiveness and Liquidity
Financial institutions adjust deposit rates based on their specific liquidity positions and funding needs following central bank policy shifts. While the repo rate hike influences the broader system, the timing and extent of these revisions vary across lenders. Sundaram Finance aims to remain competitive while maintaining its current deposit base of ₹6,088 crore.
5Credit Safety and Ratings
Sundaram Finance maintains a strong credit profile, holding AAA ratings with a stable outlook from agencies including ICRA and CRISIL. These ratings signify the highest degree of safety for depositors. The company's ability to adjust rates while maintaining these ratings underscores its robust financial position within the non-banking financial sector.
6Taxation on Deposit Interest
Interest earned on these fixed deposits is classified as income from other sources and is subject to taxation based on the depositor's applicable income tax slab. Depositors must account for this liability when calculating net returns. The final tax impact depends on individual financial circumstances and total annual taxable income levels.
7TDS Compliance Requirements
Banks and NBFCs deduct tax at source when interest earnings exceed specific thresholds. The limit is ₹50,000 for non-senior citizens and ₹1 lakh for senior citizens per financial year. TDS is typically deducted at 10% when a valid PAN is provided, though this does not represent the final tax liability for the investor.
8Strategic Implications for Investors
The rate hike provides a tactical opportunity for investors to secure higher yields on medium-term deposits. As interest rates fluctuate in response to macroeconomic policy, depositors should monitor their total tax liability and ITR filings. This adjustment reflects the ongoing shift in the interest rate environment for non-banking financial company deposits.
Original article: mint - money — Sundaram Finance Increases Fixed Deposit Rates to 8% Yield