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1 Year FD Interest Rates

Updated on: 29 Dec 2023 | 10 mins read

FDs, popular in India, involve depositing a fixed sum in a bank or NBFC for a set period, earning interest. At maturity, you receive your initial deposit back. These investments, offered by all banks and many NBFCs, come with options for different payment frequencies and carry minimal risk. This article compares 1-year FD rates across various banks/NBFCs, highlighting differences in interest for the general public and senior citizens.

FD Interest Rates with a 1-year Tenure

Financial Institution

General Public

Senior Citizen

LIC Housing Finance

5.65%

5.90%

ESAF Small Finance Bank

6.00%

6.50%

Punjab & Sind Bank

6.40%

6.90%

IDFC First Bank

6.50%

7.00%

SBI

6.80%

7.30%

Shriram City Union Finance

7.67%

8.17%

Bandhan Bank

7.25%

7.75%

Utkarsh Small Finance Bank

8.00%

8.60%

Top Banks Offering Fixed Deposit for 1 year

ESAF Small Finance Bank

  • Interest rates for deposits less than Rs. 2 crores.
  • Bank evolved from an NGO to a Micro Enterprise.
  • Inspired by Grameen Bank in Bangladesh.
  • 1-year FD rate: 6% for the general public 6.5% for senior citizens. 

 

Utkarsh Small Finance Bank

  • Senior citizens receive a 0.75% higher interest rate.
  • Options for monthly, quarterly, or maturity interest payments.
  • 1% penalty on premature withdrawal, exempt within 7 days of opening.
  • 1-year FD rate: 8% for the general public, 8.6% for senior citizens.
     

Shriram City Union Finance

  • Additional 0.25% rate on investment renewal.
  • Senior citizens get 0.5% higher interest.
  • Offers cumulative and non-cumulative FDs.
  • Extra 0.10% p.a. for Women Depositors.
  • Extra 0.15% p.a. for Shriram Group employees and relatives.
  • 1-year FD rate: 7.67% for the general public, 8.17% for senior citizens.

 

LIC Housing Finance

  • Applicable for deposits up to Rs. 20 crores.
  • Choice of cumulative or non-cumulative options.
  • 1% penalty on premature withdrawal after 6 months; other conditions apply.
  • 1-year FD rate: 7.35% for the general public, 7.6% for senior citizens.

 

Bandhan Bank

  • For a 1-year tenure, the FD interest rate is 7.25% for the general public and 7.75% for senior citizens.
  • Retail deposits under ₹2 crore are eligible for these rates.
  • Senior citizen rates apply only to Resident Indians upon submission of age proof.
  • Interest earned is subject to TDS as per Indian tax laws, and PAN submission is mandatory.
  • A penal interest rate of 1% is applicable for premature withdrawal​​.
     

IDFC First Bank

  • Offers a 1-year FD interest rate of up to 7.75% for the general public and 8.25% for senior citizens.
  • Senior citizens benefit from an additional 0.5% p.a. interest rate and face no penalty on early withdrawal.
  • Flexible tenure options range from seven days to ten years.
  • Two interest payout options are available: monthly or quarterly.
  • Deposits are safe and insured up to ₹5 lakh per customer.
  • Fixed interest rates protect investments from market volatility.
  • Offers an overdraft facility on select FD accounts and loans against FDs at lower interest rates​​
     

Punjab & Sind Bank

  • Offers a 1-year FD interest rate of 6.40%.
  • Senior citizens receive an additional 0.50% interest for deposits under Rs. 2 crore.
  • Super Senior Citizens (aged 80 and above) get an extra 0.15% interest on certain term deposits.
  • The bank also has special rates for terms like 444 days (7.40%) and 555 days (7.35%), valid until 30.11.2023.
  • A minimum deposit of Rs. 1 lakh is required for certain term deposit schemes​​.
     

State Bank of India (SBI)

  • The interest rate for a 1-year term deposit is 6.80% for the general public and 7.30% for senior citizens.
  • The revised rates are effective from 15.02.2023.
  • Fixed deposit investments are insured up to Rs. 5 lakh per customer.
  • The bank provides flexibility in choosing the tenure for FDs​​.

Benefits of Investing in a 1-Year FD

  • Time Flexibility: Ideal for short-term financial goals with the advantage of a 1-year commitment.
    Quicker access to invested capital compared to longer-term FDs.
  • Interest Rate Advantage: Higher interest rates than savings accounts for a similar period.
    Fixed returns unaffected by market volatility within the investment year.
  • Loan Collateral: Can be used as collateral for loans, typically allowing up to 90% of the FD value.
  • Emergency Fund Utility: Acts as a backup for unforeseen expenses with the option for premature withdrawal, subject to penalty.
  • Renewal Options: The auto-renewal feature enables reinvestment at the end of the tenure, possibly at higher rates if interest rates rise.
  • Minimum Investment: Low entry barrier, making it accessible for most investors.
  • Tax Implications: Interest income is taxable yet provides a better post-tax return than a regular savings account over a year.
  • Investment Security: Safe investment choice with guaranteed returns due to fixed interest rates.
  • Regular Income Stream: Option for periodic interest payouts, catering to those needing a consistent income over the short term.

Final Thoughts

Fixed deposits are a safe means to park your funds for the desired term and earn guaranteed interest. FD interest rates for 1 year, though lower than most market-linked instruments, offer a fair rate of return. You should analyse the key features of the FDs offered by different institutions and choose the one that best suits your risk appetite, premature withdrawal requirements, and required returns.

FAQs

Is FD in housing finance companies safe?

Fixed deposits with housing finance companies that are rated ‘Safe’ by credit rating agencies are safe and come with minimal risks.

How should I choose between a short-term FD and a long-term FD?

Longer-term FDs come with higher interest rates. Therefore, if you can manage by locking in your amount for more than 1 year, you should go for a Long term FD. Else, you have to opt for a short-term FD.

What is a recurring deposit?

A recurring deposit consists of a bank/post office deposit account in which you make monthly 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.

What is a sweep-in FD?

In a sweep-in fixed deposit, your savings or a current account is linked to your FD. You have to specify the minimum balance in the savings account, beyond which any amount is to be swept into the FD. This allows you to earn higher interest rates on your surplus money while maintaining minimum liquidity. In case the balance in your savings account falls short, you can withdraw the same from the linked FD without any penalties. 

Can I link multiple FDs to one savings account?

Yes. You can link multiple fixed deposits to a single savings account.

Can I link multiple savings accounts to one FD?

No. You can link only one account to one FD.

What factors affect 1-year FD Interest Rates?

Several macroeconomic factors, including inflation, monetary policy, and government regulations, influence the interest rates of 1-year FDs​​.

What is the interest rate offered on 1-year FDs by major Indian banks?

As of the moment, the majority of banks offering 1-year FDs have an interest rate ranging from 5%-8.6% per annum.

Are the interest rates on 1-year FDs subject to change?

Market fluctuations and regulatory changes are prevalent, which can lead to changes in the interest rates on the 1-year FDs. Make sure to refer to your bank for such details.

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