Private banks that offer up to 7% interest on one-year fixed deposits

Several investors prefer fixed deposits (FDs) for short-term goals as they are safe and returns are assured. However, interest rates on FDs have declined sharply in last one year. This is because the Reserve Bank of India (RBI) has steadily cut repo rates over the past one year. Of course, there has been a pause in the August policy announcement. Banks have followed the same course and continued reducing the interest rates on fixed deposits across tenures.

Even so, there are still some banks that offer interest rates of up to 7 percent on one-year FDs, according to data compiled by BankBazaar.

Higher rates offered by smaller private banks

As many as five private sector banks and two small finance banks offer FDs with rates of 6 per cent or more for a one-year tenure. IndusInd Bank, RBL Bank, IDFC First Bank, Yes Bank and DCB Bank offer 6.5-7 per cent interest on their one-year FDs.

Small finance banks such as Ujjivan Small Finance Bank, AU Small Finance Bank typically offer higher rates 6.5 per cent and 6 per cent respectively because they need to attract depositors’ funds.

Axis Bank, HDFC Bank and ICICI Bank offer 5.45 per cent, 5.10 per cent and 5 per cent respectively on their one-year FDs. The top two public sector banks, the State Bank of India (SBI) and Bank of Baroda (BOB) pay 5.10 per cent.

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. The investment range is Rs 100 to Rs 10,000 for a one-year FD.