Sundaram Home Finance has increased interest rates on 3 to 5-year fixed deposits by 0.25%. This rate hike aims to attract more retail deposits, which currently account for about 25% of the company's total funding. The move follows the company's report of a ₹2,295 crore deposit base as of March 31, 2026.
Sundaram Home Finance has revised its fixed deposit (FD) interest rates upward by 0.25% for tenures ranging from three to five years, effective August 1, 2026. This adjustment is part of a broader strategy to strengthen the company's retail deposit base, which plays a crucial role in its liability management.
New Interest Rate Structure
The updated rate card offers varied yields based on the depositor category. For general investors, the interest rate on 3-year deposits is now 7.25%, while 4-year and 5-year deposits will earn 7.40%. Senior citizens, who typically receive a higher rate than the general category, will see their earnings increase to 7.75% for these tenures. Additionally, deposits held by trusts will now earn 7.50% interest over the 3 to 5-year period.
Strategic Importance of Retail Deposits
According to the company, fixed deposits currently represent approximately one-fourth of its total funding mix. As a non-banking financial company (NBFC) focused on housing finance, maintaining a stable and diversified source of funds is essential to manage interest rate risk and support long-term lending. Managing Director D Lakshminarayanan noted that the company serves over 15,000 individual depositors. The firm also reported a strong renewal rate of over 75%, indicating a high level of customer loyalty among its existing deposit base.
Financial and Operational Context
As of March 31, 2026, the company held a total deposit base of ₹2,295 crore. For investors, the reliance on public deposits is a key area to monitor, as these are generally more stable than wholesale market borrowings but require consistent competitive pricing to retain and grow. While the interest rate hike may increase the cost of funds for the company, it is a common move in the current financial environment to ensure liquidity and reduce dependence on bank loans or market debt. Investors should monitor how this rise in funding costs affects the company's net interest margin—the difference between the interest earned on home loans and the interest paid to depositors—in the upcoming quarterly results.