In its March 2024 FOMC meeting, the US Federal Reserve indicated that it would cut interest rates in the second half of 2024. Following the US Fed, the RBI is also expected to cut interest rates in the second half of 2024. Once that happens, the banks in India may also cut interest rates on fixed deposits.
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However, in March 2024, some banks increased their fixed deposit rates. In the case of most banks, the current fixed deposit interest rates being offered are at a decadal high. So, are these the best interest rates on fixed deposits? And should you lock into these high fixed deposit rates? Let us discuss.
Interest rates of fixed deposits
Let us compare the current fixed deposit interest rates that are being offered by some private, public, and small finance banks (SFBs).
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Big private sector banks: Fixed deposit interest rates
Let us look at the interest rates being offered on various FD tenures by some big private sector banks.
| name | FD interest rate – General citizens | FD interest rate – Senior citizens | FD tenure |
| IndusInd Bank | 7.75% | 8.25% | 1 year 7 months to 2 years |
| Kotak Bank | 7.40% | 7.90% | 391 days to less than 23 months |
| HDFC Bank | 7.25% | 7.75% | 18 months to less than 21 months |
| Axis Bank | 7.20% | 7.85% | 17 months to less than 18 months |
| ICICI Bank | 7.20% | 7.75% | 18 months to 2 years |
The above table shows that among big private banks, IndusInd Bank is offering one of the best FD interest rates of 7.75% p.a. for a tenure of 1 year 7 months to 2 years.
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Public sector banks: Fixed deposit interest rates
Let us look at the interest rates being offered on various FD tenures by some big public sector banks.
| Bank name | FD interest rate – General citizens | FD interest rate – Senior citizens | FD tenure |
| Bank of Baroda | 7.25% | 7.75% | Above 2 years and up to 3 years |
| Bank of India | 7.25% | 7.75% | 2 years |
| Canara Bank | 7.25% | 7.75% | 444 days |
| Punjab National Bank | 7.25% | 7.75% | 400 days |
| SBI | 7.00% | 7.50% | 2 years to less than 3 years |
The above table shows that among big public sector banks, 4 banks are paying the same interest rate of 7.25% p.a. However, the Bank of Baroda is offering the 7.25% p.a. rate for the highest tenure of above 2 years and up to 3 years.
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If we compare the FD interest rates of big private banks and PSU banks, some private banks like IndusInd Bank and Kotak Bank are offering better interest rates.
Small private sector banks: Fixed deposit interest rates
Let us look at the interest rates being offered on various FD tenures by some small private sector banks.
| Bank name | FD interest rate – General citizens | FD interest rate – Senior citizens | FD tenure |
| RBL Bank | 8.10% | 8.60% | 546 days to 24 months |
| IDFC FIRST Bank | 8.00% | 8.50% | 500 days |
| DCB Bank | 8.00% | 8.60% | 25 months to 26 months |
| Bandhan Bank | 7.85% | 8.35% | 500 days |
| Yes Bank | 7.75% | 8.25% | 18 months to less than 24 months |
The above table shows that among small private banks, RBL is offering a higher interest rate of 8.10% p.a. for a tenure of 546 days to 24 months.
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Let us compare the FD rates of small private banks with those of big private banks and PSU banks. Here also, most small private banks are offering higher FD interest rates.
Small finance banks: Fixed deposit interest rates
Let us look at the interest rates being offered on various FD tenures by some small finance sector banks.
| Bank name | FD interest rate – General citizens | FD interest rate – Senior citizens | FD tenure |
| Unity SFB | 9.00% | 9.50% | 1001 days |
| Shivalik SFB | 8.90% | 9.40% | 12 months to 18 months |
| Suryoday SFB | 8.65% | 9.10% | 2 years and 2 days |
| Ujjivan SFB | 8.50% | 9.00% | 15 months |
| Jana SFB | 8.50% | 9.00% | 365 days |
The above table shows that most small finance banks are paying an interest rate of 8.5% p.a. and above on FDs of various tenures. Unity SFB is paying a higher interest rate of 9.00% p.a. for a higher tenure of 1,001 days.
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When we compare the SFB FD interest rates, they are better than those of PSUs, small and big private banks.
DICGC insurance cover for bank deposits
Some people are not comfortable investing in FDs of small finance banks as they consider them risky. Please note that all deposits of every customer with every bank are insured for Rs. 5 lakhs. The Deposit Insurance and Credit Guarantee Corporation (DICGC), a 100% subsidiary of the RBI, provides insurance coverage against a bank failing or going into liquidation. The customer doesn’t need to pay the insurance premium as the bank pays it. SFB deposits are also covered under the DICGC insurance cover.
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Should you lock into current FD rates?
In April, at the start of the financial year, many investors review their investment portfolio for rebalancing. When reviewing your fixed income allocation, you may invest some money in bank fixed deposits at the current high interest rates.
However, do note that fixed deposits (except for five-year tax-saving FDs) don’t qualify for deduction from taxable income under Section 80C of the IT Act. Also, the interest earned on FDs is added to the individual’s overall income and taxed at the slab rate.
In the case of most banks, the current interest rates being offered are at a decadal high. Also, the interest rates are expected to go down in the second half of 2024. Hence, if you are looking to park some money in fixed deposits, this is a good time to lock into the current high interest rates.
