HDFC Bank Responds On Automatic Renewals
Reader Tushar writes in, on the “Banks Sucker You On Automatic Renewals” post. He took the trouble of writing to HDFC Bank (thanks!) and getting a response.
We wish to inform that a Fixed deposit is a contract between the Bank and the customer for a given term and at a given interest rate corresponding to the contracted term. Hence, on auto renewal, the term of the contract remains the same and the prevailing rate for that term is offered on the deposit. It could so happen that the Bank’s asset liability balance has in the interim changed and hence the rate prevailing for the same term could be higher or lower than the original rate, at the point of auto renewal.
We would further like to clarify that our Bank post November 2006 till January 2009, was offering special rates in the tenures such as *6 months 15 days and 6 months 16 days, 9 months 15 days and 9 months 16 days, 1 year 15 days and 1 year 16 days and 2 year 15 days and 2 year 16 days. However post January 2009, the special rate tenors were changed to only 4 specific tenures i.e. 6 months 16 days, 9 months 16 days, 1 year 16 days and 2 years 16 day and *these special rate tenors have since remained constant i.e. the best rates of the Bank have been offered on these tenors only, unlike what has been mentioned in the article referred to by yourself. Customers, who are booking and auto renewing their deposits at these tenors with the bank, have got the better rate on auto renewal.
Perhaps I was mistaken in the “1 year 17 days” option, and I apologize for that if it’s so (I don’t have any proof now).
But obviously people who kept an auto renewal FD before 2006 for 1 year 1 day – which is what most rational people would do – are stiffed. And people who kept it for one year 15 days in 2009 – again, what seemed the logical choice between (1 year 15 days) and (1 year 16 days) – are stiffed. That tiny minority that chose 1 year 16 days is the beneficiary – and in a few years when they figure out they have enough suckers in that tenure…
Colour me cynical, but I don’t trust the banks. Love the stock, love the stability of their offering, love their ATM presence, but this kind of tactic makes me lose faith in their “fiduciary” behaviour (that they will work towards the best for me). You gotta fend for yourself.