Google joins hands with Setu to let users open FDs on GPay: Report

Setu has already created a beta version for the application programming interface.

Google joins hands with Setu to let users open FDs on GPay: Report

Furthering its way in the Indian financial space, Google has partnered with a fintech company, Setu, which specialises in API development to allow its customers to book FDs (Fixed Deposits) via Google Pay. Notably, with over 150 million users worldwide and a strong domestic market outreach with a penetration rate of 65 percent, GPay is a prominent player in the Indian digital payments space. 

Fixed Deposits form an extremely crucial part of an average Indian’s finances. Per RBI data, the cumulative amount of FDs for the financial year 2020-21 stood at Rs 1,88,44,594, which rose significantly to Rs 1,91,67,506 as of June 2021. This move is aimed at highlighting FDs as a solid financial instrument, in comparison with mutual funds, stocks, and more. 

The fintech in question, Setu works for simplifying digital financial infrastructure. Per its website, it provides “A simple, uniform set of APIs that let you access fixed deposit products of multiple banks. Just One set of APIs will offer FDs via any bank with integrated UPI payments, eliminating any compliance hassles and the need to open multiple bank accounts."

As per media reports, the beta version of this API, which is already in testing and will facilitate booking FDs, will offer various time durations, starting from 7-29 days, 30-45 days, 46-90 days, 91-180 days, 181-364 days, and a year, among others. While the current RBI guidelines mandate a range between 4.90 percent and 5.50 percent for term deposits exceeding a year,  small finance banks (SFBs) like Equitas, NiYo, and more have been aggressively tapping the deposit segments, offering higher interest rates than traditional banks, which benefits the new-age customers. For instance, FDs of Jana, Equitas, and Utkarsh SFBs are offering returns of up to 6.5 percent. 

SFBs, per RBI regulations, are required to have a minimum net worth of Rs 200 crore within 5 years of its inception, along with a mandatory listing within a period of 3 years once the net worth reaches Rs 500 crore.

While one may think that SFBs are a risky proposition, these banks are regulated judiciously by the RBI, having to conform to standard requirements like other commercial banks, like following SLR (Statutory Liquidity Ratio) and CRR (Cash Reserve Ratio), along with maintaining a capital adequacy ratio of 15 percent. These banks are also covered by deposit insurance, which guarantees the depositor up to Rs 5 lakh per account holder in case of a massive default.

Unlike their conventional counterparts, the scheduled commercial banks, which have a net bank credit to priority sector limit of 40 percent, SFBs can push this limit by up to 75 percent, since rules dictate that at least 50 percent of their portfolio must comprise loan amounts of up to Rs 25 lakh. SFBs can also not lend more than 10 percent of their entire net worth to just a single individual.

GPay, in partnership with Equitas, will offer an interest rate of 3.5 percent for the shortest tenure, inching up to 6.35 percent for FDs with a tenure of 1 year. What makes this set-up special is that one does not need to have any prior account with Equitas bank to avail of this offer. The linkage will be established with your existing savings accounts, both for the purpose of deposits and withdrawals. The success of this system will also determine whether or not it will be extended to other payment applications as well.