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Home / FD investors used to get 9.2% in this small finance bank before it was merged. What changes for FD investors, loan customers?

FD investors used to get 9.2% in this small finance bank before it was merged. What changes for FD investors, loan customers?

Investors of fixed deposits (FDs) have been in a sweet spot for a few years now. The interest rates of FDs had gone up and small finance banks (SFBs) were offering 9% to 9.5%, which in many cases were more attractive than the offerings of public and private sector banks. Many have opted for such FDs.

But now these FD investors should take note of a development at a prominent player in the sector: Fincare Small Finance Bank, which used to offer 9.21% to senior citizens on FDs maturing in 750 days as on March 27, 2024, according to, recently merged with AU Small Finance Bank, the largest SFB in the country in asset size. This is the first such merger in the small finance bank sector, and it came into effect on April 1, 2024.

Now, customers should be aware of what will happen to the FDs they had opened in Fincare SFB before the merger? Will they be eligible for the deposit insurance protection of up to Rs 5 lakh, including principal and interest? Will the IFSC codes change after the merger? ET Wealth Online presents an FAQ on how the Fincare-AU Small Finance Bank merger will impact customers.

1) I opened an FD at an interest rate of 8.71% for a tenure of three years in Fincare SFB on February 21, 2024. The rate was lower at AU Small Finance Bank. Will I continue to fetch a higher interest rate on my Fincare FD after the merger?

Yes. You will get the interest rate at which you had booked your fixed deposit till the time your deposit matures.

2) When my Fincare FD matures after the merger, will I be able to renew it at the rate I was offered when opening the deposit?

No. The interest rate on fixed deposits remains fixed throughout the tenure. So, there will be no change in your FD rate until it matures. But when it is up for renewal, it will fetch the rate offered by AU Small Finance Bank for that tenure at that time, says Rajiv Sharma, Partner, Singhania & Co. 3) I opened a recurring deposit (RD) in Fincare SFB before April 1, 2024. Will I continue to get the same rate despite the merger?

Yes. There will be no change in the RD interest rate till maturity despite the merger. However, if you book an RD after this one matures, you will get the interest rate that is being offered by AU Small Finance Bank at that time.

4) Will I still get a deposit insurance cover for the savings or fixed deposits I had opened in Fincare SFB?

Just like Fincare SFB, AU Small Finance Bank is also insured by Deposit Insurance and Credit Guarantee Corporation (DICGC). So the deposits in AU Small Finance Bank will also be protected by the deposit insurance programme, up to Rs 5 lakh.

Keep in mind that this amount includes both the principal that you have invested and the interest that you get on your investment. All funds held under the same type of ownership (single, joint, etc) at the same bank are added together before the deposit insurance payout is determined. If you have a savings account, FD and a recurring deposit in a bank, you will get insurance cover up to Rs 5 lakh for all the three deposits.

5) I had two FDs — one in Fincare SFB, and one in AU Small Finance Bank. As the two small finance banks are now merged, will I get deposit insurance for both the accounts, or will they be considered separately for the deposit insurance programme?

Account holders maintaining multiple accounts in both Fincare Small Finance Bank and AU Small Finance Bank will, after the merger, be treated as account holders of one banking entity, says Alay Razvi, Partner, Accord Juris. “The DICGC provides insurance coverage of up to Rs 5 lakh per depositor per bank. Consequently, your total deposits across all accounts in the merged entity will be insured up to this limit.”

The deposit insurance cover will be applied cumulatively to the total deposits held in both accounts, says Tribhuvann.

6) I have taken a loan from Fincare SFB. Will the interest rate of the loan go up after the merger? Will there be any changes in the terms and conditions?

There will be no change in the loan interest rate due to the merger, according to AU Small Finance Bank. If there is any change in the rate due to changes in the lending rates, the bank will inform you.

As of now, the contractual terms of your loan agreement remain unchanged. Your loan account number will remain the same and continue to be the point of reference for all communication with the bank. Your EMI will remain as it is.

7) Can I walk into any branch of Fincare SFB to do a financial transaction, such as to prepay my loan or submit a cheque for clearance?

AU Small Finance Bank has asked the customers of Fincare SFB to visit its branches. According to AU SFB’s website, you will be able to do all kinds of transactions at the branches of Fincare SFB after some time. AU Small Finance Bank will keep you posted when the branches of Fincare SFB are fully operational. Till then, the branches of AU Small Finance Bank can be a one-stop solution for Fincare SFB customers.

During the announcement of the merger, AU Small Finance Bank said it would focus on ensuring “smooth and seamless integration within the next 9-12 months and delivering exceptional banking services and value to the customers.”

8) Will the IFSC code of Fincare SFB customers change due to the merger?
Yes, the IFSC code of Fincare SFB is set to change because of the merger, says Nilesh Tribhuvann, Managing Partner, White & Brief-Advocates & Solicitors. “The IFSC codes for customers of Fincare Small Finance Bank will change to reflect the unified operations under AU Small Finance Bank. Customers will be notified about their new IFSC codes, and it will be crucial for them to update this information for their electronic transactions, including NEFT, RTGS and IMPS, to avoid any disruptions,” he adds.

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