Should You be Investing in Utkarsh Small Finance Bank over SBI? Here’s Some Clarity

What are the chances that you’ve heard about Utkarsh Bank? 

If you have one, well, you deserve a bow. In the case that you haven’t (like most of us currently) read on! 

The last thing you might think about when depositing your money in a bank account is the possibility of the bank being bankrupt one day. While the possibilities of a bank’s insolvency are still rare, cases like the fall of SVB Bank remind us that isn’t impossible. 

Bank coverage policies refer to the guidelines that dictate how much risk the bank can take and how much protection it requires for credit activities. This policy is designed to ensure that banks have sufficient capital to take on any losses that lending might lead to. Banks usually go through multiple rounds of stress-tests and risk assessment models to know what their coverage policies should look like. All of this is done to reduce the chances of liquidation. 

It’s no surprise then that legacy banks like SBI are considered safe bets by many. And while SBIs reliability is rarely questioned, it’s important to analyse other banks and see if there’s a possibility of better coverage, policies and so on. 

Utkarsh Small Finance Bank, founded in 2009, is a Small Finance Bank (SFB) that’s caught pan-Indian attention for attractive interest rates on savings accounts and FDs. SFBs are niche banks governed by the Reserve Bank of India (RBI). These banks provide basic banking services like accepting deposits and lending funds, focusing on financial inclusion in sectors across the country. 

When you compare these two banks, there’s an obvious difference. One is a wide-spread public bank with decades to back its reliability and the other is a SFB, with limited access and only basic banking services. Naturally, you’d think about the safety of depositing or investing in a bank like Utkarsh over SBI. But can doing this be more profitable for you? Let’s have a deeper look –

  • Utkarsh, like all banks in India, is insured by the DICGC. This means that in the case of the bank’s insolvency, a depositor is insured up to Rs 5 Lakh. This amount will be given out to depositors by the liquidators. 
  • Utkarsh has a liquidity management policy in place, which includes maintaining a liquidity coverage ratio (LCR) above regulatory requirements.
  • Utkarsh also has a comprehensive insurance plan to minimise all types of losses to the Bank. This includes everything from loss of equipment and theft to mergers and third party liabilities. 
  • Being a SFB, Utkarsh adhered to regulations set by the RBI. According to the Statutory Liquidity Ratio and Cash Reserve Ratio, Utkarsh has to ensure that it sets aside 22.25% of their deposits. Moreover, it has to maintain the Capital Adequacy Ratio of 15% and is not allowed to lend more than 10% of their capital to a single borrower.

With this clear, it can be understood that Utkarsh Bank’s coverage policies are as safe as SBI’s. The question then, is all about whether you should consider depositing in Utkarsh Bank. 

Currently, Utkarsh Bank’s FD interest rates range between 4%-8%, this is about 2 percent higher than SBI. Apart from obvious factors like limited branches, investing in Utkarsh Bank might be a good way to diversify for you.

Check out this Table to Understand Better


BankTenureInterest Rate (per annum)
Utkarsh Bank7 Days to 45 Days4.00% 
Utkarsh Bank46 Days to 90 Days 4.75% 
Utkarsh Bank91 Days to 180 Days 5.50% 
Utkarsh Bank181 Days to 364 Days 6.50% 
Utkarsh Bank365 Days to 699 Days 7.75% 
Utkarsh Bank700 Days 8.25% 
Utkarsh Bank701 Days upto 5 Years7.50% 
Utkarsh BankAbove 5 Years to 10 Years 7.00% 
SBI1 year to less than 2 years5.50%
SBI2 years to less than 3 years5.70%
SBI3 years to less than 5 years5.75%
SBI5 years to 10 years5.80%

That being said, it is important to note that on factors like operational risk, market risk, and regulatory risk, Utkarsh Bank might not have the widest scope for stability, like SBI. It’s important to not put your eggs in one basket and look carefully into the coverages that might help you in the event of a fall. 

Knowing a bank’s coverage policies inside out is the first step for you to ensure safety of your money. It’s also important to look into how much coverage a policy can bring to your deposits and how you can take safer measures and increase coverage. 

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