Certainly, fixed deposits (FDs) enjoy widespread popularity, largely due to their stability amid market volatility. In contrast to investments tied to market performance, subject to fluctuations, FDs provide a fixed interest rate determined at the onset of the investment. This assured predictability offers a sense of security, particularly appealing to individuals who prefer to avoid risks.
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Issued by reputable institutions, usually banks or financial entities with robust credit ratings, these deposits markedly diminish the risk of losing the initial deposit, establishing them as a secure option for cautious investors. Furthermore, they are available in different tenors, spanning from a few days to several years, to accommodate a variety of financial objectives. Moreover, certain deposits provide regular interest payouts, enhancing liquidity for investors when necessary.
Small banks yield the best
Small finance banks lead the way in offering the most competitive FD interest rates among all bank categories. In the subset of scheduled small finance banks, Unity Small Finance Bank stands out with the highest FD interest rate at 9.00% p.a., closely followed by Suryoday Small Finance Bank offering rate of 8.65% p.a. In the scheduled private sector banks, SBM Bank takes the lead with the best FD interest rate of 8.25% p.a. for tenures exceeding 3 years 2 days but less than five years. As for scheduled public sector banks, Punjab & Sind Bank offers the highest FD rate, reaching up to 7.40% p.a. for a tenure of 444 days.
Senior citizens stand to gain
Senior citizens in India enjoy advantageous perks in the realm of fixed deposits. In contrast to regular FDs, they have the potential to earn an additional 50-80 basis points (bps) on their deposits, leading to a substantial increase in returns, particularly for extended tenures. To illustrate, while a standard 5-year FD may yield 8% p.a., a senior citizen FD could generate returns of 8.50% p.a. or even 8.80% p.a., depending on the banking institution.
Currently, numerous banks and small finance banks (SFBs) entice senior citizens with FD rates reaching up to 9.50% p.a. This rate is notably appealing, especially in the current economic climate marked by rising interest rates.
Benefiting from immanent flexibility
These FD investments boast inherent flexibility. Senior citizens have the liberty to choose FD tenures spanning from 1 year to 10 years, enabling them to align their investments with specific needs and goals. For instance, opting for a shorter tenure with monthly interest payouts is ideal for those seeking regular income. Conversely, selecting a longer tenure with compounded interest is a strategic choice for those with long-term financial objectives, aiming for maximum returns.
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The table below outlines the leading FD rates provided by various scheduled banks, aligned with different tenures.
| Name of the bank | Highest FD rate (in %) | 1-year FD rate (in %) | 3-year FD rate (in %) | 5-year FD rate (in %) | Additionalinterest ratefor senior citizens(in %) |
| Unity Small Finance Bank | 9.00 | 7.35 | 7.65 | 7.65 | 0.50 |
| Suryoday Small Finance Bank | 8.65 | 6.85 | 8.60 | 8.25 | 0.40-0.50 |
| Fincare Small Finance Bank | 8.61 | 7.65 | 8.11 | 8.00 | 0.60 |
| Equitas Small Finance Bank | 8.50 | 8.20 | 8.00 | 7.25 | 0.50 |
| Jana Small Finance Bank | 8.50 | 8.50 | 7.25 | 7.25 | 0.50 |
| Utkarsh Small Finance Bank | 8.50 | 8.00 | 8.50 | 7.50 | 0.60 |
| SBM Bank | 8.25 | 7.05 | 7.30 | 7.75 | 0.50 |
| ESAF Small Finance Bank | 8.25 | 6.00 | 6.75 | 6.25 | 0.50 |
| Ujjivan Small Finance Bank | 8.25 | 8.25 | 7.20 | 7.20 | 0.50 |
| AU Small Finance Bank | 8.00 | 6.75 | 8.00 | 7.25 | 0.50 |
| RBL Bank | 8.00 | 7.50 | 7.50 | 7.10 | 0.50 |
| DCB Bank | 8.00 | 7.15 | 7.60 | 7.40 | 0.50-0.60 |
| Bandhan Bank | 7.85 | 7.25 | 7.25 | 5.85 | 0.50-0.75 |
| Induslnd Bank | 7.85 | 7.50 | 7.25 | 7.25 | 0.40-0.75 |
| Shivalik Small Finance Bank | 7.80 | 7.80 | 7.50 | 6.50 | 0.50 |
| IDFC First Bank | 7.75 | 6.50 | 7.25 | 7.00 | 0.50 |
| YES Bank | 7.75 | 7.25 | 7.25 | 7.25 | 0.50-0.75 |
| Punjab & Sind Bank | 7.40 | 6.20 | 6.00 | 6.00 | 0.50 |
| Punjab National Bank | 7.25 | 6.75 | 7.00 | 6.50 | 0.50 |
| Bank of Baroda | 7.25 | 6.85 | 7.25 | 6.50 | 0.50-1.00 |
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Should you invest in FDs?
Undoubtedly, FDs stand out as an excellent choice for investors who prioritise stability and predictability in their investments, particularly those averse to risks. These deposits are widely regarded as one of the safest investment options due to their backing by the issuing institution and the assurance of guaranteed returns. This makes them particularly appealing to individuals who prefer to steer clear of the fluctuations in the stock market and other volatile investments. Furthermore, fixed deposits serve as a secure haven for investments, allowing investors to manage financial risks effectively. The predetermined returns offer a sense of security, providing peace of mind and facilitating effective financial planning.
