Fixed deposit is an investment tool offered by financial institutions in India. As an investor, you can deposit a sum of money with the bank for a fixed period and earn interest.
The tenor can vary, but the investor has the liberty of choosing it. Once deposited, the amount cannot be withdrawn before the completion of the lock-in period. On doing so there will be slight deductions on the interest income. Once the lock-in period is over, the depositor can look forward to an amount which includes both the principal amount i.e. the amount of money which was invested by the depositor along with the interest which is accrued for that period.
When contrasting the earnings and investment options of an FD with shares, the rate of interest and the returns given by an FD are comparatively less. There are no surprises with an FD, and market fluctuations will have no effect whatsoever on the amount to be earned at the end of the tenor. So, investing in FD is a risk-free way of securing funds and earnings for a fixed tenor.
With earnings come taxes and tax deductions. Though, the earnings from an FD are taxable, there is the option of tax saver fixed deposit. As per Section 80C of the Indian Income Tax Act, 1961, a depositor can claim a deduction, if the tax saver FD interest rates are between 5.5-7.75% with a lock-in period of 5 years.
Factors Affecting FD
The maturity amount of an FD is directly dependent on three major factors which are shared below –
- The Principal Amount – In simple words, the principal amount is the extra funds a person has or the money saved that they want to invest for their future needs, for example, a salaried person saving an annual lump sum for retirement.
- The Rate of Interest (ROI) – This is the percentage set by the financial institution, which will determine the end of tenor gain. It can vary as per age (fixed deposit rates for senior citizens are higher), tenor and amount.
- The FD Tenor – It will depend on the lock-in period of savings, for example, a person saving for a daughter’s higher education when she first starts school will opt for a 10-year maturity.
Most depositors know that the best bank FD rates are what primarily affect the FD balance at maturity. A higher ROI means the depositor will get a higher sum at maturity.
ROI of Fixed Deposit by Leading Indian Financial Institutions
As has been mentioned above, an interest rate is a certain percentage on the principal amount which the bank pays to the depositor.
Here, the FD Depositor is the lender and the Financial Institution is the Borrower.
However, the lowest and highest limit of the rate of interest to be paid on the amount deposited is decided by the RBI. Banks or NBFCs have to choose an ROI from within that ratio.
A depositor, therefore, needs to compare fixed deposit interest rates to pick the best deal.
Compare Fixed Deposit Interest Rates for Different Banks
The table below shows the rate of interest offered by major Indian banks and allows depositors to easily compare FD interest rates. Online FD calculator helps investors choose the bank which can offer higher return on your fixed deposit investment at the time of maturity.
Banks | Interest | Tenor |
| Axis Bank | 3.50%-7.45% | 7 Days – 10 Years |
| Lakshmi Vilas Bank | 4.50%-7.50% | 7 Days – 20 Months |
Tamil Mercantile Bank | 5.00%-7.15% | 15 Days – 3+ Years |
| Yes Bank | 5.00%-7.10% | 7 Days – 10 Years |
| Union Bank | 5.00%-6.85% | 7 Days – 10 Years |
| Bandhan Bank | 3.50%-7.40% | 7 Days – 10 Years |
| Karur Vysya Bank | 5.00%-7.00% | 7 Days- 3 + Years |
| IndusInd Bank | 3.50%-7.65% | 7 Days – 5+ Years |
| Oriental Bank of Commerce | 5.75%-6.75% | 7 Days – 10 Years |
| Punjab National Bank (PNB) | 5.70%-6.75% | 7 Days – 10 Years |
| Bank Of Baroda (BOB) | 4.25%-6.75% | 7 Days – 10 Years |
| State Bank of India | 5.75%-6.85% | 7 Days – 10 Years |
IDFC Bank | 4.00%-8.25% | 7 Days – 10 Years |
| ICICI Bank | 4.00%-7.25% | 7 Days – 10 Years |
| IDBI Bank | 5.75%-6.85% | 15 Days – 20 Years |
| Karnataka Bank | 3.50%-7.30% | 7 Days – 10 Years |
| HDFC Bank | 3.50%-7.25% | 7 Days – 10 Years |
| DCB Bank | 4.00%-7.75% | 7 Days – 10 Years |
| Ratnakar Bank | 5.00%-7.50% | 7 Days – 20 Years |
| Kotak Mahindra Bank | 3.50%-7.30% | 7 Days – 10 Years |
| Vijaya Bank | 5.00%-6.80% | 7 Days – 5 Years Plus |
| Jana Small Finance Bank | 6.00%-8.50% | 7 Days – 10 Years |
| Indian Bank | 4.50%-6.50% | 7 Days – 10 Years |
| Bank of India (BOI) | 5.25%-6.25% | 7 Days – 10 Years |
| City Union Bank | 6.25%-7.10% | 7 days – 10 Years |
| Deutsche Bank | 7.50%-8.25% | 1 Year – 5 Years |
6.8%-7.6% | 1 Year – 5 Years |
The above table clearly shows that the highest rate of interest is offered by Deutsche Bank at 7.50% with Post Office not far behind at 7.50%. Keep in mind, that the longer the tenor the higher is the ROI and therefore if you were to look at Jana Small Bank, it is 8.50% a longer tenor of up to 10 years. If you were to invest the same amount of money for 7 days, the interest earned would fall to 6%. The IDBI Bank which offers one of the lower rates of interest does not offer the tenor of 7 days, and instead, the minimum tenor of 15 days will get you an interest rate of 5.75%. It is obvious, the interest you earn on your principal is directly dependent on the tenor you chose.
Disclaimer – The rates are subject to RBI directives and an individual bank’s policies. Hence, they are liable to change without prior notice.
Compare Fixed Deposit Rates for Different NBFCs
Just like banks, there are many NBFC’s which are offering FDs as an investment product. The table below shows the different rates of interest that are applicable.
Company FD | Interest | Tenor |
| Shriram Transport Finance UNNATI Scheme (yearly, non-cumulative) | 8.00% – 8.25% | 3 to 5 Years |
| KTDFC | 8.00% – 8.25% | 1 to 5 years |
| Post Office Time Deposit | 7.40% | 5 Years |
| DHFL Aashray Deposit Plus (cumulative) | 7.70% – 8.05% | 1 to 5 Years |
| Bajaj Finance Ltd | 7.50% – 7.85% | 1 to 5 Years |
| PNB Housing Finance | 7.45% | 1 to 5 Years |
| LIC Housing Finance Ltd | 7.30% – 7.45% | 1 to 5 Years |
| Mahindra Finance (Dhanvruddhi cumulative scheme) | 8.30% | 33 Months |
If you look at the above table, then it is obvious that unlike banks, NBFCs provide a loan for a minimum period of one year. Mahindra Finance offers the highest rate of interest at 8.30% but the tenor is fixed at 33 months. In comparison, KTDFC offers an interest rate of 8% to 8.25% for 1 to 5 years while Sriram Transport Finance Unnati Scheme also offers 8% to 8.25% but the tenor is 3 to 5 years. The lowest ROI is offered by LIC Housing Finance Ltd. at 7.30% for 1 to 5 years.
Disclaimer – The rates are subject to RBI & NHB directives and an individual NBFC’s policies. Hence, they are liable to change without prior notice.
Remember, even the smallest of differences in FD interest rate offers, which can be as low as 0.25%, can have a substantial effect on the maturity amount. Since, most senior citizens depend on earnings from FDs as their sole source of income, the RBI offers a higher rate of interest to them.
Senior Citizen Fixed Deposit Schemes
The Senior Citizen FD rates in India is higher when compared to the other FD rates. This step is taken to provide seniors with a steady and reliable income so they can live enjoy financial independence.
Here is a table showing the variable rates of interest offered to senior citizens by different banks.
Senior Citizens FD Rates for Top 5 Banks | ||
Bank | Interest | Tenor |
| IDFC Bank | 8% | 366 Days |
| RBL Bank | 7.15% – 7.85% | 1 to 5 Years |
| Yes Bank | 7.40% | 3 to 6 Months |
| ICICI Bank | 7.25% | 390 Days to 2 Years |
| HDFC Bank | 7.50% | 1 Year 17 Days – 5 Years |
If you were to compare this with the other FD rates offered by banks, then it is easy to see that senior citizens are offered a higher rate of interest. For example, Yes Bank offers 5% to 7.10% ROI for a tenor of 7-10 years in the general category, but to senior citizens, they offer 7.40% for a short tenor of three to six months.
Disclaimer – The rates are subject to RBI & NHB directives and an individual NBFC’s policies. Hence, they are liable to change without prior notice.
The rate of interest may vary with an RBI or NHB directive, but a depositor, whether senior or not, cannot change the ROI or withdraw money until the tenor is complete. However, most banks and NBFCs offer several different types of FDs to meet the individual requirements of their depositors.
Different Types of FD Scheme
There are two types of FD schemes offered and are differentiated by the interest payout. The most basic difference is whether the interest is compounded or paid to the depositor.
Cumulative Fixed Deposit
A financial institution will compound the interest every quarter or year, and then pay the interest accrued at the time of maturity. In other words, interest earned for the quarter, half-year or year is reinvested as part of the principal amount.
Features –
- Interest is compounded quarterly, half-yearly or annually
- At maturity, depositor gets the principal amount along with interest accrued for the tenor
- Best suited for individuals who want to create a corpus and keep their investment safe
Non-cumulative Fixed Deposit
A financial institution will pay the interest earned by the depositor every month, quarter, six months or 12 months. In other words, depositors can earn a regular income from their fixed deposit.
Features –
- Interest is earned on a monthly, quarterly, half-yearly or annual basis
- At maturity, depositor gets only the principal amount
- Best suited for individuals who need a regular income
The type of FD chosen will affect the interest earned and the ease of equity withdrawal in case of an emergency. The benefits of investing in a fixed deposit are that its advantages are not limited to Indian residents only – Non-Resident Indians or NRIs can also enjoy the benefits of a fixed deposit in India.
NRI FD Scheme
Non-Resident Indians have the option of parking their funds in a fixed deposit in India and earn a substantial interest income. The transfer of money to the term deposit can be either in Indian Rupees or foreign currency. NRIs can enjoy tax benefits on their deposits.
The different types of NRI schemes offered by Indian financial institutions include:
- Non-Resident External Fixed Deposit (NRE)
- Non-Resident Ordinary FIxed Deposit (NRO)
- Resident Foreign Currency Account (RFC)
- Foreign Currency Non-Repatriable Account (FCNR)
NRIs can use online banking facilities for the ease of depositing and maintaining their accounts. The rate of interest can be dependent on the tenor, the amount deposited and in some cases, even the currency in which the deposit is made. Though, interest rates are a major factor when finalizing a financial institution, several other factors should also be kept in mind.
Choosing the Best Financial Institution for an FD
Once the decision to save funds has been taken, the next step is obviously selecting a company which will keep the investment safe. Comparing the interest rates offered should not be the only criteria, though it is the most important one.
Other factors which depositors must consider in order to choose the correct investment company are as below –
- Know the credit rating of the company, as it points toward the debt-to-income ratio and reliability (AAA rating is considered the best).
- The reputation of the financial institution plays a major role. For example, a company which has been servicing clients for decades will definitely be more experienced and reliable.
- Authority of the company to offer an FD as an investment should be taken into consideration. Do not invest money with those banks or NBFCs which are not authorized to do so by the RBI or NHB.
- The quickness of the company to adapt to market forces showcases their ability to survive the fluctuations of the financial industry. The faster they adapt, the better is their chance of survival.
- Though, new financial services providers may not have strong reputations, they will have faster processes, exercise more transparency, and better communication modules. All these together can make the experience satisfactory while ensuring depositors receive an assured return on their investment.
Apart from the above, don’t forget to compare the special offers that financial institutions provide to women, senior citizens, NRIs, and many more.
In the end, it doesn’t matter whether you are an individual or an organization, it is important to compare fixed deposit interest rate and select the right financial institution to get the most out of your investment.