DFCC Group Treasury introduces Dual Currency Deposits
DFCC recently introduced a Dual Currency Deposit product to the market. It is a yield enhancement product that offers investors the opportunity to earn a higher return compared to traditional types of deposits. The product is being offered through DFCC Vardhana Bank, the almost wholly-owned commercial banking subsidiary of DFCC Bank. In this interview, Mr Kapila Nanayakkara, Senior Vice President- Group Treasury talks about this new product and also about other investment products, offered through the Bank. What are the investment products currently offered by DFCC's Group Treasury?
We specialize in foreign exchange, structured derivatives, capital market products and the whole gamut of requirements that are needed to hedge exposures and investments of our valued customers. These products include Treasury Bills and Bonds, REPOs & Reverse REPOs and REPOs backed by Corporate Debt instruments. On the Foreign Exchange front, we are quite competitive in pricing and provide FX related hedging products in facilitating trade related transactions. Our latest addition to the suite of products is Dual Currency Deposits. What is special about the Dual Currency Deposit product?
This is a tailor made structured investment product linked to foreign exchange markets. It provides customers who have exposure in foreign currencies to maximize returns on their investments, whilst ensuring competitive foreign exchange rates for their transactions, providing them with the opportunity to create a foreign exchange investment strategy which suites their needs. A Dual Currency Deposit provides a higher rate of return when compared to a conventional time deposit and has the flexibility in terms of the amount and the tenor. What are the currencies and investment tenors available on Dual Currency Deposits offered by Vardhana Bank?
We have a range of currencies available including AUD, CAD, SGD, GBP, EUR, JPY, and CHF. The customer also has the flexibility of choosing the tenor up to three months. Further a minimum investment of USD 75,000 or equivalent in another eligible currency is required to get started. The customer can choose an investment currency and exchange rate at which conversion to the second currency takes place on maturity, if the market for deposit currency compares favourably against the second currency. What are the risks involved in investing in Dual Currency Deposits?
Well, as with any investment product, investment in a Dual Currency Deposit too has to be considered in the context of risk-reward dynamics. One has to be thorough in its knowledge and judgment in respect to the Risk profile of the product. We are continuously educating our customers about the features of the product and we ensure that they are conversant with the product mechanism before they invest. Who would you target this product to?
As I mentioned before, a Dual Currency Deposit is a yield enhancement product and has this inherent complex nature. This product is specially recommended for clients who are having exposures in more than one foreign currency. We offer this product to a selective clientele who are familiar with the RiskReward profile of the product. This requires completing a Risk Profiling and Customer Appropriateness exercise in line with internal and external regulatory requirements.
Talking about investing in Government Securities, what's your view on the key benefits of investing in products such as treasury bills/bonds as opposed to a conventional fixed deposit?
There are a number of benefits in investing in government securities. Treasury bills and bonds are Gilt-Edged securities issued by the government and thus in practical terms, considered Risk Free Investments. Another key advantage is that these investments are tax free. Further, these securities are very liquid and have an active secondary market. Hence the investor can sell the securities when required with ease. Further these securities can be pledged as collateral when you need to borrow. Your division manages the treasury activities of both DFCC Bank and its subsidiary Vardhana Bank. How does your treasury rank among peers in terms of dynamism and versatility?
Our treasury is growing rapidly and offers all the modern products to suit customer needs. We focus on developing relationships and these relationships have facilitated our emergence as a reputed treasury in the market. We strive to be the most active market player in government and corporate bonds, spot and forward foreign exchange and derivatives. Our Treasury is committed to provide continuous pricing as a market maker to support market growth and to provide liquidity. A highly professional and skilled team continuously works towards achieving excellence in service standards, externally and internally. Hence, I can confidently place our treasury as one of the most reliable, professional and price competitive treasuries in the country.