With high inflation and declining interest rates, banks have reduced interest rates on fixed deposits (FDs) across the board. Savers have been at their wit’s end to cope with reduced interest rates.
The Consumer Price Index (CPI) based inflation stood at 7.61 per cent in October — the highest since May 2014.
Most risk-averse investors prefer to stay away from the volatility of the equity markets despite their closing at record highs in last week. They prefer investing in bank fixed deposits (FDs) for their goals, as they consider them to be the safest avenues, given that returns are assured. Banks have reduced interest rates on fixed deposits across tenures after steady repo rate cuts by the Reserve Bank of India (RBI).
Despite falling rates, there are still some banks that offer attractive interest on one-year FDs. Not surprisingly, smaller private banks offer better rates, given the competition they face in garnering deposits.
Higher rates offered by smaller private banks
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 are higher compared to those offered by public sector banks. For instance, IndusInd Bank tops the chart and offers 7 per cent interest on one-year FD, followed by RBL Bank and Yes Bank which offering 6.75 per cent interest on one-year FD.
ICICI Bank and HDFC Bank offer 4.90 per cent interest on one-year FDs. Axis Bank offer 5.15 per cent interest. Kotak Mahindra Bank offers 4.60 per cent interest on its one-year FD, which is the lowest rate among private banks.
Public sector banks such as Punjab National Bank and Canara Bank offers 5.30 per cent interest on one-year FDs. Established banks such as State Bank of India (SBI) and Bank of Baroda (BOB) offer 4.90 per cent interest, 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.
A note about the table
The data on FDs is as on November 11, 2020, as given in the respective banks’ websites. Interest rates of all listed (BSE) private banks and foreign banks are 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.