Most risk-averse investors prefer fixed deposits (FDs) for short-term goals in their investment portfolio as they consider it to be the safest avenue, as returns are assured. Often, depositors prefer investing in FDs in the same bank in which they hold their savings accounts. However, it’s important to know that there are banks that allow you to invest in FDs even if you don’t hold a savings account with those banks. It’s important that you inquire with your bank and then decide to invest. With reducing interest rates on fixed deposits across tenures, savers have been hit hard.
Smaller private banks offer higher interest
Smaller private banks offer interest rates of up to 7 per cent on one-year FDs, according to data compiled by BankBazaar. These interest rates on one-year FDs are higher compared to those offered by leading foreign banks. For instance, IndusInd Bank and Yes Bank offer 7 per cent interest, while RBL Bank offers 6.85 per cent on one-year FDs. Foreign banks such as Standard Chartered, DBS Bank and Deutsche Bank offer 6.30 per cent, 4.15 per cent and 4 per cent respectively on their one-year FDs.
Leading private banks such as Axis Bank, HDFC Bank and ICICI Bank offer 5.15 per cent, 5.10 per cent and 5 per cent on their one-year FDs. Established public sector banks such as Bank of Baroda and the State Bank of India offer 4.90 per cent interest for the same tenure on their FDs.
Investments in fixed deposits of up to Rs 5 lakh are guaranteed by the Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the RBI.
The minimum investment amount varies across banks. At private banks, the investment amount ranges from Rs 100 to Rs 10,000 and at foreign banks, it’s Rs 1,000 to Rs 20,000 for a one-year FD
The data on FDs is as on October 7, 2020, as given in the respective banks’ websites. Interest rates of all listed (BSE) private banks and foreign banks considered for data compilation. Banks for which verifiable data is not available are not considered. The minimum investment amount may vary depending on the type of the term deposit account. For all FDs, quarterly compounding is assumed.
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