Fixed deposits (FDs) are one of the most popular investment products in our nation, particularly among risk-averse investors such as senior folks, who often rely on their FD returns even for day-to-day expenditures.
However, with the Reserve Bank of India maintaining the repo rate at a low of 4% for more than a year, several banks have lowered their FD interest rates. This, along with the fact that FD returns are fully taxed according to the tax slab rate of the investor, might further reduce the true rate of return – a troubling trend for investors.
Having said that, there are still a few private and small finance institutions giving above-average FD interest rates. Following a thorough risk evaluation, investors may consider storing a portion of their funds in these banks’ FDs, particularly if doing so is consistent with their expected returns and risk tolerance.
Investors might also use a method known as ‘FD laddering’ to maximise investment returns. According to BankBazaar, you can split your investment money into many FDs (preferably with a few banks) with varying tenures and construct an investing loop instead of putting your whole assets in a single FD.
For example, if you want to invest Rs 5 lakh, instead of putting it all into a single FD for 5 years, you can divide it into five FDs of Rs 1 lakh each. The first FD might have a one-year term, the second a two-year tenure, the third a three-year tenure, the fourth a four-year tenure, and the fifth a five-year tenure. You should also reinvest your FDs upon maturity, if possible, to establish an investing loop.
This would allow you to take advantage of any future better returns offers while reducing the need to pre-close an FD after losing interest income to fulfil any requirements.
So, if you’re thinking about investing in an FD, here’s a list of ten private banks that are presently giving the highest interest rates on regular FDs of less than Rs 1 crore for terms of up to 5 years. Please keep in mind that senior citizen depositors typically receive preferential rates of up to 50 basis points higher than standard rates.
10 Private Banks that offers a good FD return for Tenures till 5 years are:
- DCB Bank at a FD interest rate 5.7-6.50 range for tenures
- Indusland Bank at a FD interest rate 5.50-6.50 range for tenures
- RBL Bank at a FD interest rate 5.40-6.50 range for tenures
- YES Bank at a FD interest rate 5.25-6.50 range for tenures
- TNSC Bank at a FD interest rate 5.75-6.00 range for tenures
- IDFC First Bank at a FD interest rate 5.25-6.00 range for tenures
- Karur Vysya Bank at a FD interest rate 4.25-6.00 range for tenures
- Axis Bank at a FD interest rate 4.40-5.75 range for tenures
- South Indian Bank at a FD interest rate 4.40-5.65 range for tenures
- Federal Bank at a FD interest rate 4.40-5.60 range for tenures
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