Risk-averse investors prefer fixed deposits (FDs) of banks due to the safety and assurance of returns. FDs offer flexible tenures and liquidity to your portfolio, allowing you to withdraw when needed.
Despite falling interest rates, you should invest certain percentage of your portfolio in FDs offering higher returns on one-year FDs from the table given. The smaller private banks tend to top the rate chart on fixed deposits, given the competition they face in garnering deposits. However, you should do a thorough risk assessment and due diligence of the bank before investing in FDs.
Smaller private banks are offering higher rates
Smaller private banks are offering 6.5 percent interest rates on one-year FDs, according to data compiled by BankBazaar. For instance, IndusInd Bank and RBL Bank offer 6.5 percent interest rates on one-year FD. These interest rates are higher compared to those offered by public sector banks.
The interest rates offered by small finance banks are higher compared to leading private banks. AU Small Finance Bank and Ujjivan Small Finance Bank offer 5.50 percent and 6.50 percent interest respectively on one-year FDs.
Also read: Kotak Mahindra Bank, Punjab National Bank offer the lowest interest rates on home loans
Leading private banks such as ICICI Bank and HDFC Bank offer 4.90 percent interest on one-year FDs. Axis Bank offer 5.15 percent interest. Kotak Mahindra Bank offers 4.50 percent interest on one-year FD which is lowest rate among all private banks.
Public sector banks such as Union Bank, Punjab & Sind Bank and Bank of India offer 5.25 percent interest on one-year FDs. Established banks such as State Bank of India (SBI) and Bank of Baroda (BOB) offer 5 percent and 4.90 percent interest respectively, on their one-year 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 and public banks, the amount ranges from Rs 100 to Rs 10,000.
Also read: IDBI Bank and Canara Bank offer higher rates on savings accounts than public sector peers
A note about the table
The data on FDs is as on February 24, 2021, 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.