Best Fixed Deposit Interest Rates, FD rates

Banks have been reducing interest rates on Fixed Deposits. This article talks about Best Fixed Deposit Interest Rates,  gives Fixed Deposit Interest Rates of Top Banks, the FD Interest Rates of Few Banks like SBI, HDFC, ICICI Bank for the tenure of 1, 3 and 5 Years. It also discusses how Interest Rates of Fixed Deposits are changing and why they are expected to go down?

Best Fixed Deposit Interest Rates

For a number of Indians, a Fixed Deposit is the preferred option when it comes to investing. However, Fixed Deposit interest rates are decreasing.  The Table below gives an idea of highest Interest Rate offered by the Bank(in red), Interest Rate offered by State Bank of India (SBI) and Interest Rate offered by Private Bank which we have selected as ICICI Bank across different periods.

  • The fixed deposit schemes offered by most banks can be availed for tenures ranging from as short as seven days to as long as 10 years. Few of the banks, such as the State Bank of Patiala, IDBI Bank, the Ratnakar Bank, etc. offer FDs that stretch to 20 years as well.  The interest on FDs is compounded on a quarterly basis.
  • Most of the banks offer from 0.25% to 0.50% extra to senior citizens.
  • Banks offer a higher interest for deposits of Rs. 1 crore and above. These deposits are called Bulk Deposits.
  • Most banks compound interest quarterly.
  • Banks offer Loan/Overdraft against the amount available in Fixed Deposit. The interest is generally 0.5% to 1% more than that offered to FD.
  • TDS (Tax deduction at source) at the rate of 10% is deducted if the interest income is more than Rs 10,000 in financial year per bank
  • There might be penalty for pre-mature withdrawal of Fixed Deposits
  • RBL Bank (Old name is The Ratnakar Bank)
Period of the FD  Bank and Interest Rate
Less than a year
  • RBL 7.50% (241 days to 364 days)
  • SBI 5.5%-7% (7 days < 1 year)
  • SBI 7% (211 days to less than 1 year)
  • ICICI Bank 5.50-6.95%
1 year
  • RBL 7.75%
  • SBI 6.9%
  • ICICI Bank 7.25%
2 years
  • RBL 7.85%
  • SBI 6.85%
  • ICICI Bank 7.25%
3 years
  • RBL 7.70%
  • SBI 6.5%
  • ICICI Bank 7.25%
5 Years
  • RBL 7.70%
  • SBI 6.5%
  • ICICI Bank 7.25%

Fixed Deposit Interest Rates of Top Banks

Table below Gives the Fixed Deposit Interest Rates of Top Banks

Fixed Deposits with Bank Tenure (Min-Max) Interest Rates for Regular Deposit
State Bank of India 7 days-10 years 5.25% p.a.-7.00% p.a.
Indian Post Office 1 year-5 years 7.10% p.a.-7.90% p.a.
HDFC Bank 7 days-10 years 3.50% p.a.-7.25% p.a.
ICICI Bank 7 days-10 years 4.00% p.a.-7.50% p.a.
Axis Bank 7 days-10 years 3.50% p.a.-7.50% p.a.
Punjab National Bank 7 days-10 years 4.25% p.a.-7.50% p.a.
Bank of India 7 days-10 years 4.00% p.a.-7.25% p.a.
Canara Bank 7 days-10 years 4.00% p.a.-7.50% p.a.
Indian Bank 7 days-More than 3 years 5.00% p.a.-7.25% p.a.
Bank of Baroda 7 days-10 years 4.50% p.a.-7.30% p.a.
Bandhan Bank 7 days-10 years 3.50% p.a.-8.00% p.a.
Kotak Mahindra Bank 7 days-10 years 4.00% p.a.-6.75% p.a.
Union Bank 7 days-10 years 5.00% p.a.-7.25% p.a.
Indian Overseas Bank 7 days-10 years 4.00% p.a.-6.75% p.a.
Central Bank of India 7 days-10 years 4.00% p.a.-7.00% p.a.
LIC HFL 1 year-5 years 7.85% p.a.-7.95% p.a.
Bank of Maharashtra 7 days-10 years 4.75% p.a.-6.80% p.a.
IDFC Bank 7 days-10 years 4.00% p.a.-8.25% p.a.
State Bank of Travancore 7 days-10 years 5.50% p.a.-6.95% p.a.
Yes Bank 7 days-10 years 5.50% p.a.-7.15% p.a.
Corporation Bank 7 days-10 years 5.00% p.a.-7.10% p.a.
Andhra Bank 7 days-10 years 4.00% p.a.-7.00% p.a.
State Bank of Hyderabad 7 days-10 years 5.50% p.a.-7.00% p.a.
RBL Bank 7 days-20 years 5.00% p.a.-7.85% p.a.
IDBI Bank 15 days-20 years 4.25% p.a.-7.15% p.a.

The Image below shows the FD Interest Rates of Few Banks for the tenure of 1, 3 and 5 Year.

Best Fixed Deposit Interest Rates of Banks

Fixed Deposit Interest Rates of Banks

Change in Interest Rates of Fixed Deposits

For someone who does not want any kind of uncertainty with regard to his or her investments, Fixed Deposits is the right choice. But Banks have been reducing rates on Fixed Deposits. Major banks, both private and public sector, recently revised their interest rates on fixed deposits (FDs). State Bank of India (SBI), the country’s largest lender, cut its interest rate to 6.50% for maturity periods between 3 years and 10 years. This is among the lowest FD rates in the industry now. Why are Interest Rates on FD declining? How will FD rates pan out in Future.

  • Increased liquidity on the back of rise in cash deposits by customers, due to the government’s demonetisation move. According to the Reserve Bank of India (RBI), banks have received deposits in excess of Rs 5.11 trillion since the announcement. All banks have money more than their requirement.
    • A large chunk of these deposits have been in savings accounts and banks will have to give a minimum of 4% interest on these deposits.
    • The influx of cash in such large volumes also means that there are more funds to be lent to customers. This is an indication towards a cut in the lending rate. A cut in lending rates is preceded by a cut in the deposit rates. The relationship between deposit rates and the marginal cost of funds based lending rate (MCLR) is such that a decline in deposit rates results in decline of the MCLR. And MCLR determines the lending rate for the consumers. Banks have to announce an MCLR every month.
  • Repo rate cuts in the past monetary policies, have led to a fall in deposit rates.

Interest rates of FDs could be headed further downwards. Experts expect RBI to cut key rates. Accordingly, the interest rates on FDs will also go lower.

One of the key points with a bank FD is that the changes in the FD rates will impact only prospective investors. Those who are already invested in FDs will get rates that were applicable when the investment was made. This means that if one invest in, a three-year FD at 7.5% per annum, then the interest rate remains at this level for the entire duration of the deposit even if rates change in the interim period.

Since interest rates are expected to go down, the smart strategy for investors today is to ensure that they lock themselves into a fixed deposit for a longer time period so that they continue to earn higher rates of interest even if rates were to go down.  Alternatively, you can also consider investing in a debt fund.

Interest on FD is Taxable

The interest rate on FDs is entirely taxable. Our article Fixed Deposit , Interest , TDS, Tax,Income Tax Return, Refund disccuses about FD interest rate, TDS and ITR

  • Interest that is earned on fixed deposits is taxable in the hands of the depositor as per the income slab so a person who earns income between 2 lakh to 5 lakh pays only 10% tax on it while person who earns above 10 lakh pays 30% tax (And education cess and surcharge at the rate of 3%). If TDS is deducted and you are in 20% tax slab then you need to pay remaining tax of 10%.
  • If the aggregate interest income from fixed deposits that you are likely to earn for all your deposits held in a branch is greater than Rs 10,000 in a financial year, you become liable for TDS.
  • If PAN is not submitted TDS is deducted at the rate of 20%.

If you fall in the highest tax bracket of 30.9%, then 6.5% annual return from an FD would get reduced to a return of 4.49% post-tax. Now, let’s factor in inflation, say 5.28%, the average Consumer Price Index based (CPI) inflation from September 2015 to September 2016. In this case, a post-tax return of 4.49% for individuals in the highest tax bracket will translate to a negative return figure of -0.79%.

Similarly, if you are in the 10.3% tax bracket, then your post-tax return will be seen at 5.83%. With the average inflation figure, the returns here would be 0.55%.

Note: You can go to individual banks’ websites to check these interest rates for different tenures.

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Do you invest in FD? What do you think whether FD interest rate will increase?

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