Assured returns, multiple tenure options and high liquidity make fixed deposits (FDs) one of the most popular investment instruments in our country, especially among risk-averse investors like senior citizens. However, the Reserve Bank of India’s latest decision to keep the repo rate unchanged at 4% would mean the bank FD interest rates are likely to remain low for the time being – something that would be bothering its investors.
Since FD returns are fully taxable according to the investor’s applicable slab rate, low interest rates would mean lower post-tax returns which could impact the investor’s journey to timely achieve his financial goals.
That said, some banks offer higher interest rates than others on their FDs. You could consider investing in those banks after a thorough risk assessment. You can also deploy what is termed as the FD laddering strategy according to which you break your investment funds into multiple FDs with different tenures and keep reinvesting them if feasible in order to maximise investment returns.
That means, if you want to invest Rs 5 lakh in FD for 5 years, then instead of investing it all in a single FD, you can break the corpus into five FDs with tenures of 1 year, 2 years, 3 years, 4 years and 5 years and keep reinvesting them upon maturity, according to BankBazaar.
Creating an investment loop would, thus, allow you to benefit from any higher interest rate offers in the future while maintaining a higher degree of liquidity as it would minimise the chances of having to pre-close an FD after losing interest income while tackling an emergency.
So, if you’re looking to invest in an FD for the medium term, here are the banks which are currently offering the highest rates on FDs with a tenure between 3 years and 5 years. Do note, we have only considered the highest advertised rates on FDs for tenures between 3 years and 5 years.
Also note, all the interest rates mentioned below are for normal FDs (for non-senior citizen depositors) amounting to less than Rs 1 crore. The interest rates offered to you could be different depending upon your age, chosen bank, tenure, investment amount, etc, as per BankBazaar.
Banks currently offering the highest interest rates on FDs with tenures between 3 years and 5 years
Disclaimer: Data as on respective banks’ websites on February 5, 2021. Only the maximum offered interest rate for the tenure range between 3 years and 5 years has been considered in the table. The interest rates are for normal fixed deposits amounting to less than Rs 1 crore. Data compiled by BankBazaar.com
