• Post last modified:August 28, 2020
  • Reading time:6 min(s) read

Are you also feeling the pain of declining fixed deposit rates like millions of others? or Are you one of those who have to pass through tremendous mental stress due to restrictions on the withdrawal of deposits by RBI from your bank?

Well to solve the problem we have compiled a list of banks offering a high rate of interest on fixed deposits keeping in view the safety of deposits also.

Fixed Deposit

A fixed deposit is one of the most popular investment options especially with senior citizens due to guaranteed returns and the safety it offers over other investment products like equity, bonds, etc.  However, with the current decline in deposit rates income of many people living on interest income has been affected. To solve the problem we have compiled a list of banks offering high fixed deposit rates keeping in view the safety of deposits as well.

Major Factors to Consider while Choosing a Fixed Deposit

1. Deposit Rate

The deposit rate is one of the primary considerations while choosing a deposit product. Banks offer fixed deposits ranging from 7 days to 10 years and the rate of interest vary with tenure of the deposit. Hence, first, you have to decide the period for which you want to stay invested. Except for specific circumstances, one should choose the tenure in which the fixed deposit rate is the highest.

2. Safety

Another major consideration while selecting a fixed deposit is the standing/credibility of the Bank. This aspect has gained importance because of difficulties faced by depositors in withdrawing money from some banks which were under financial stress in the recent past.

Hence, many people prefer larger banks over others even if they offer a lower rate of interest.

Deposit Insurance

The deposits kept in all commercial banks and cooperative banks are insured by Deposit Insurance and Credit Guarantee Corporation (DICGC) up to a maximum amount of Rs 5.00 lakhs (Rupees Five Lakhs). As per DICGC, the insurance is for both principal and interest amount held by a depositor in the same right and same capacity as on the date of liquidation/cancellation of the bank’s license or the date on which the scheme of amalgamation/merger/reconstruction comes into force.

Tax on Fixed Deposits

Interest income on fixed deposit is taxable at the applicable income tax slab of the depositor applicable to total income. Further TDS on interest income is deducted as under:

TDSRate 
FY 2020-21 (for from 1st April till 13 May)
Rate 
FY 2020-21 (for from 14 May till 31 March 2021)
Threshold Limit for FY after which TDS is deducted
(Rs.)*
Tax deducted at Source (Where Pan card is submitted by the depositor)10.00%7.50%40000
Tax deducted at Source (Where Pan card is not submitted by the depositor)20.00%20.00%40000
*For Senior Citizens the threshold limit is Rs. 50000.

In case the depositor does not want the bank to deduct tax, he/she is required to submit Form 15G (for individuals other than Senior Citizens) or Form 15H (for Senior Citizens).

Fixed Deposit Rates of Large Banks

Fixed Deposit Interest Rates (Regular Individuals) – up to Rs. 2.00 Cr

Bank1 year (%)3 year (%)5 year (%)10 year (%)
State Bank of India4.405.305.705.70
HDFC Bank5.105.205.505.50
Punjab National Bank5.255.255.305.30
Bank of Baroda5.105.105.305.30
ICICI Bank4.755.355.505.50
Axis Bank5.455.505.505.50
Kotak Mahindra Bank4.754.904.504.50

Value of Rs. 1.00 lacs invested (With quarterly compounding) in Large Banks

Bank1 year (Rs.)3 years (Rs.)5 years (Rs.)10 years (Rs.)
State Bank of India104473117111132708176116
HDFC Bank105198116765131406172677
Punjab National Bank105354116938130116169302
Bank of Baroda105198116419130116169302
ICICI Bank104835117284131406172677
Axis Bank105562117806131406172677
Kotak Mahindra Bank104835115731125075156437

For Senior Citizens

Fixed Deposit Rates for SBI, Bank of Baroda, ICICI Bank, Axis Bank is 50 bps i.e. 0.50% over & above the rates offered to regular individuals.

The fixed Deposit Rate for HDFC Bank is 50 bps i.e. 0.50% over & above the rates offered to regular individuals for all tenures except for deposit of more than 5 years where fixed deposit rates are 75 bps i.e. 0.75% over & above the rates offered to regular individuals.

The fixed Deposit Rate for PNB is 75 bps i.e. 0.75% over & above the rates offered to regular individuals. Hence in 1 year & 3 years, PNB offers the highest rate of interest to Senior Citizens.

In case Senior Citizens can invest money for a minimum period of 5 years they shall consider the Senior Citizens Savings Scheme (SCSS) which offers a high rate of interest with tax benefits and is also backed by the Government of India.

Highest Fixed Deposit Interest Rates offered by New Generation Banks

Many of the new generation banks are offering a higher rate of interest rates on fixed deposits.

Bank1 year (%)3 years (%)5 years (%)10 years (%)
IndusInd Bank7.006.756.756.65
IDFC First Bank6.756.756.756.75
RBL Bank7.007.006.756.75
DCB Bank6.506.956.956.95
Bandhan Bank6.256.106.006.00

Value of Rs. 1.00 lacs invested (With quarterly compounding) in New Generation Banks

Bank1 year (Rs.)3 years (Rs.)5 years (Rs.)10 years (Rs.)
IndusInd Bank107185122239139749193388
IDFC First Bank106922122239139749195300
RBL Bank107185123143139749195300
DCB Bank106660122962141130199178
Bandhan Bank106398119915134685181401

For Senior Citizens

For New Generation Banks given above, fixed Deposit Rate is 50 bps i.e. 0.50% over & above the rates offered to regular individuals.

Conclusion

  • The deposit products are considered 100% secure and looking into history it has been observed that RBI & Government has always secured depositor’s interest. However, hardship being faced by depositors of some banks in withdrawing their money has highlighted the importance of considering the Size, Strength, Management Quality, and Ownership of Banks while choosing a deposit product.
  • In case the Safety of the deposit is the primary concern, one should stick to larger banks. Further, in the case of large deposits, the same may be deposited into more than one bank.
  • For depositors preferring a higher rate of interest, Tier-ll banks (New generation Private Banks) shall be an obvious choice. But these banks, while offers a higher rate of interest, have limited presence in the form of a branch network. However, with the growth of digital products, if one is comfortable with online banking, he/she may open an online savings account & book online deposits to avail a higher rate of interest.

Sources

https://www.dicgc.org.in/FD_A-GuideToDepositInsurance.html

https://www.sbi.co.in/web/interest-rates/deposit-rates/retail-domestic-term-deposits

https://www.hdfcbank.com/personal/resources/rates

https://www.pnbindia.in/Interest-Rates-Deposit.html

https://www.bankofbaroda.in/interest-rates-charges.htm

https://www.icicibank.com/interest-rates.page

https://www.axisbank.com/interest-rate-on-deposits

https://www.kotak.com/en/personal-banking/deposits/fixed-deposit/fixed-deposit-interest-rate.html

https://www.idfcfirstbank.com/interest-rate.html

https://drws17a9qx558.cloudfront.net/document/PDF%20Pages/RevisionInterestRates-Circular.pdf

https://www.dcbbank.com/cms/showpage/page/dcb-fixed-deposits/ppage/deposit-rates

https://www.federalbank.co.in/deposit-rate

https://www.indusind.com/in/en/personal/rates.html

https://www.bandhanbank.com/Html/Interest-Rates.html

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Harry
Harry
2 months ago

Really helpful details..