Amid the volatility in the stock markets, all seems well for fixed deposit (FD) investors as almost all the banks are offering inflation-beating deposit rates. As the Reserve Bank of India (RBI) hiked the repo rate six times in a row, banks increased the interest rates on FDs across all investment tenures.
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Inflation has been over 6 per cent for 10 months of 2022 forcing RBI to increase rates by 250 bps to 6.50 per cent through six consecutive hikes beginning May 2022.
According to the new deposit pricing, on average any depositor of a public sector bank is assured of 7 to 7.25 per cent for fixed deposits for a tenor ranging from 200 days to 800 days.
Amit Gupta, MD, SAG Infotech said that the greatest interest rates for three-year fixed-rate deposits are offered by smaller private banks and small financing institutions. For FDs with a three-year term, the top 10 banks’ average interest rate is 7.5 percent.
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Nirav Karkera, Head of Research, Fisdom said banks have been transmitting policy rate hikes rather efficiently to borrowers, but have not quite maintained the pace for depositors. At the same time, as the economy commits to capex-led expansion, the growth in demand for credit has outpaced the deposit growth rate. In a quest to serve the robust and growing credit demand, it is almost imperative for banks to offer not only inflation-beating rates on fixed deposits to compete with alternative products but to go beyond and offer rates that are competitive with industry peers. A combination of such developments have led to a favourable spike in bank fixed deposit rates.
Fixed deposits provide regular intervals of liquidity and secured interest income. FDs might be helpful in building an emergency corpus because of the abundant liquidity they guarantee, added Gupta.
The high rate offering also comes as banks have almost fully passed on the 250-bps hike in RBI rate since May last year to their borrowers.
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The nation’s largest lender State Bank of India (SBI) is offering 7.10 per cent for the general public and a higher 7.60 per cent to senior citizens on an annualised basis for fixed deposits in the 400 days bucket.
Central Bank of India FD rates
The Central Bank of India gives the second best rate at 7.85 per cent to senior citizens for 444 days and 7.35 per cent to retail, while Union Bank of India is pricing its 800 days deposits at 7.30 per cent and 7.80 per cent for retail and senior citizens.
Punjab National Bank FD rates
Punjab National Bank is offering retail and senior citizens, respectively, at 7.25 per cent and 7.75 per cent on its 666 days bucket.
Bank of Baroda FD rates
Bank of Baroda’s new pricing comes at 7.05 per cent and 7.75 per cent for 399 days.
Canara Bank FD rates
For 400 days, Canara Bank is offering 7.15 per cent and 7.65 per cent
UCO Bank FD rates
UCO Bank comes at 7.15 per cent and 7.25 per cent for 666 days
HDFC Bank offers only 7 per cent to the general public and 7.50 per cent to senior citizen depositors for five years.
ICICI Bank gives 7 per cent for more than 15 months to retail and 7.5 per cent to senior citizens for over 15 months.
