FD Interest Rates Comparison

Fixed Deposit (FD) is an investment option that provides assured returns. These deposits earn a fixed rate of interest periodically. That is why there is little to no risk of market fluctuations impacting the return. The tenure can vary from 7 days to 10 years. The deposit usually comes with a lock-in period and attracts penalties in case of premature withdrawals. The premature withdrawal facility varies from bank to bank. The interest paid out to you on the FD could be monthly, quarterly, half-yearly or yearly, which you can choose as per your income needs. Whether the interest is paid out to you or reinvested in the FD depends on whether it is a non-cumulative or cumulative FD. 

You do not get periodic interest in a cumulative FD. Instead, the occurred interest is added back to the principal and reinvested. Consequently, the next interest payment is calculated on the entire amount, including both principal and reinvested interest amount. For instance, if you invest ₹100 at 10% for two years, the interest in the first year will be ₹10, which will be reinvested. In the second year, you will earn an interest of ₹10 on the principal and ₹1 on the interest reinvested after the first year. The reinvestment happens throughout the tenure, and at maturity, a lump sum amount can be redeemed.

In contrast, regular interest is paid out to you in the case of non-cumulative FDs. The payout can be monthly, quarterly, half-yearly, or annually. As the returns here are not compounded, the effective interest rate tends to be slightly lower. As in the above example, had the interest not been reinvested, your income would have been ₹1 less. Continue reading for a detailed FD rates comparison

What is FD Rate Comparison

Different financial institutions, scheduled commercial banks, small finance banks and Non-Banking Financial Companies (NBFCs) offer FDs. The interest rates offered by them differ depending on:

  • Their own need for funds
  • Tenure of the FD
  • Size of the deposit

A detailed comparison chart lists the FD interest rates of different financial institutions. You can keep this handy reference to pick the best places to invest in FDs, based on your financial goals.

FD Interest Rates Comparison with a 1-year Tenure amount below 2 CR

Financial institutionGeneral PublicSenior Citizens
Bank of Baroda6.10%6.60%
Axis Bank6.25%7.00%
State bank of India6.10%6.60%
HDFC bank6.10%6.60%
ICICI Bank6.10%6.60%
Kotak Mahindra6.25%6.75% 

FD Interest Rates Comparison with a 1-year Tenure amount above 2 CR

 General PublicSenior Citizens
Financial institution2CR – 5 CRAbove 5 CR2CR – 5 CRAbove 5 CR
Bank of Baroda6.25%6.75%
Axis BankVariableVariable
State bank of India6.00%6.50%
HDFC bank6.50%Variable7.00%Variable
ICICI Bank6.75%Variable6.75%Variable
Kotak Mahindra6.75%Variable7.00%Variable

FD Interest Rates Comparison with a 5-year Tenure amount below 2 CR

Financial institutionGeneral  PublicSenior  Citizens
Bank of Baroda6.10%6.75%
Axis Bank6.50%7.25%
State bank of India6.10%6.90%
HDFC bank6.50%7.00%
ICICI Bank6.60%7.10%
Kotak Mahindra6.20%6.70%

FD Interest Rates Comparison with a 5-year Tenure amount above 2 CR

General PublicSenior Citizens
Financial institution2CR – 5 CRAbove 5 CR2CR – 5 CRAbove 5 CR
Bank of Baroda5.00%5.50%
Axis Bank6.50%Variable7.25%Variable
State bank of India5.00%5.50%
HDFC bank6.25%Variable6.75%Variable
ICICI Bank6.50%Variable6.50%Variable
Kotak Mahindra6.25%6.25%6.25%6.25%

Note:  Interest rates are subject to change as per the bank’s policy and the prevalent repo rate

Benefits of FD

Some of the benefits of investing in an FD are:

Maturity Period: You can invest in FDs for any tenure starting from 7 days up to 10 years as per your investment horizon.

Interest payments: The interest rate usually increases with an increase in the tenure of the FD. The frequency of interest payment can usually be chosen and can be monthly, quarterly, half-yearly or yearly. You can also choose to invest in a cumulative FD and benefit from compounding effects. 

Loans: FDs are considered secure and can be pledged as collateral for loans. You can take a loan of up to 95% of the FD value; however, this may vary from one institution to another. 

Premature withdrawal: In case of an emergency, an FD acts as an emergency fund from which you can prematurely withdraw. However, you are usually charged a penalty for the premature withdrawal of an FD. The amount of penalty charged could vary depending on the institution; some might not even charge a penalty.

Renewal: At maturity, you can withdraw your capital from the FD or renew it. FDs usually come with an option of auto-renewal. 

Minimum and Maximum Amount: The minimum amount for opening an FD account can be as low as ₹ 1,000 in some institutions in India. However, this may depend on the institution; for instance, some institutions have a different minimum amount for FDs booked electronically. There is no upper limit on the amount of money you can deposit in an FD.

Tax Benefits: An interest income above ₹ 10,000/- is taxable as per your highest tax bracket. However, an income of up to ₹ 1.5 lakhs invested in tax-saver fixed deposits with a tenure of 5 years is deductible from income tax under Section 80C of the Income Tax Act, 1961.

Low Risk: Fixed deposit is a very low-risk investment option. You should only invest in FDs of financial institutions with credible credit ratings. 

Regular Income Stream: In case your income stream is not consistent or you need to supplement your income, non-cumulative fixed deposits ensure that you receive a consistent stream of income.  

Final Thoughts

A detailed FD rates comparison is essential before you decide to invest in one. However, you must look beyond just the interest rate while investing. It’s good to consider factors such as the credit rating of the institution offering the fixed deposit, the penalties on premature withdrawal, the policy on loans against the FD, etc., while investing. After a thorough analysis of FD rates and features, you should invest your funds in an FD that suits your financial goals. 

Frequently Asked Questions

Is FD in housing finance companies safe?

Fixed deposits made in Housing Finance Companies that are deemed stable and safe by credit rating agencies are safe and carry minimal risks, if any.

What are the disadvantages of a fixed deposit account?

The disadvantages of investing in FDs are:

Low Interest rate: The interest rate on FDs is usually lower than returns on other market-linked instruments.

Interest Rate doesn’t change: The interest rate on FD doesn’t change during its tenure. As a result, inflation or other factors might make returns seem incompetent. 

Taxation: Interest income from FDs is taxable with TDS.

What is a sweep-in FD?

A sweep-in fixed deposit is linked to your savings or current account. You have to specify the minimum balance in the savings account, beyond which any amount is swept into the FD and invested. In case the balance in your savings account falls short, you can withdraw the same from the linked FD without any penalties.

What is a recurring deposit?

A Recurring Deposit (RD) consists of a bank/post office deposit account in which you make periodic contributions. You will earn a fixed rate of interest on the accumulating deposit. This interest rate depends on the tenure of the RD you select and the deposit amount.

Catalysing Investments at Wint Wealth

Chandhana is a budding investment professional with growing expertise in the capital markets. She has completed her Bachelors in Business Administration with a specialisation in Finance from Christ (deemed to be) University,Bangalore. She is also a CFA L2 candidate. She is currently working as an Investment Associate at Wint Wealth.

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Disclaimer: This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The article may also contain information which are the personal views/opinions of the authors. The information contained in this article is for general, educational and awareness purposes only and is not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision, whether related to investment or otherwise, taken on the basis of this article.

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