IndusInd Bank, RBL Bank and Yes Bank offer 6.5% interest one-year fixed deposits

The Sensex is at 50,000. Even so, risk-averse investors prefer fixed deposits (FDs) of banks due to the safety and assurance of returns. FDs offer flexible tenures and liquidity in your portfolio to withdraw when needed.

Despite falling interest rates, you should invest a certain percentage of your portfolio in FDs. 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 offer higher rates

Smaller private banks are offering 6.5 per cent interest rates on one-year FDs, according to data compiled by BankBazaar. For instance, IndusInd Bank, RBL Bank and Yes Bank offer 6.5 per cent 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 offers 5.50 percent and 6.50 percent interest respectively on one-year FDs.

Leading private banks such as ICICI Bank and HDFC Bank offers 4.90 per cent interest on one-year FDs. Axis Bank offer 5.15 per cent interest. Kotak Mahindra Bank offers 4.50 per cent interest on one-year FD which is lowest rate among all private banks.

Public sector banks such as Union Bank, Bank of India, Punjab & Sind Bank and Canara Bank offers 5.25 per cent interest on one-year FDs. Established banks such as State Bank of India (SBI) and Bank of Baroda (BOB) offers 5 per cent and 4.90 per cent 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. In private and public sector banks, the amount ranges from Rs 100 to Rs 10,000.

Also read: Sensex at 50,000, it is time to rebalance your portfolio

A note about the table

The data on FDs is as on January 20, 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.