Highest FD rates can vary across durations: Here’s how to decide best fixed deposit tenure at this time

By: | Updated: October 25, 2018 1:41 PM

Lower withdrawal pressure allows the concerned bank or organisation to maintain low liquid funds and invest major part of the deposits in profitable ventures, resulting in higher gains.

Fixed Deposits, FDs, Bank FDs, Post Office deposits, FD rates, interest rates on FDs, interest rates for senior citizens, Senior Citizen Savings Schemes, SCSS, SBI, HDFC Bank, ICICI BankPeople may keep their savings as FDs in banks, small banks, NBFCs, term deposits of companies or in Post Office.

Fixed deposits give higher interest rates than the deposits in savings accounts because there are lower withdrawal pressures in FDs. Lower withdrawal pressure allows the concerned bank or organisation to maintain low liquid funds and invest a major part of the deposit in profitable ventures, resulting in higher gains, some of which are passed on to the depositors as higher rate of return.

There are also various economic environmental factors, which apart from the RBI’s policy decisions, also affect the FD rates for various tenures. For example, if banks expect a low-inflation regime in the future, they will not offer very high interest rates on long-term deposits.

People may keep their savings as FDs in banks, small banks, NBFCs, term deposits of companies or in Post Office. While interest rates in Post Office deposits are decided by the government, other organisations decide the rates of their own depending on RBI’s policy rates, overall economic conditions and profitability of the projects for which deposits are taken.

Generally senior citizens get higher interest rate on FDs than the younger citizens wherever age-wise different rates are offered. Depositors may also get tax deductions u/s 80C of the Income Tax Act on deposits for five years or more in banks and post offices. However, interest earned of FDs are taxable.

Post Office time deposits: Time deposits in Post Offices are considered better because of the Sovereign guarantee by the Government of India on the capital invested and interest earned, making the investment safer. Secondly, the government generally offers higher interest on Post Office deposits than what banks offer. However, one may invest maximum Rs 15 lakh in Post Office time deposits.

Post Office time deposit interest rates from January 1, 2018

Period Normal Rate Rate for Sr Citizens (SCSS)
1 year

6.60%

2 years

6.70%

3 years

6.90%

5 years

7.40%

8.30%

Bank FDs: The main source of funds for banks from public is fixed deposits. To get high-value transactions passed from banks or to hire a locker, you would be inadvertently made to deposit some amount in FDs depending upon the value of transactions. Starting from as low as 14 days to 10 years or even more, banks offer FDs of various tenures.

Following are the tenure-wise interest rate offered by three of India’s biggest banks – State Bank of India (SBI), HDFC Bank and ICICI Bank.

Banks ►

SBI

HDFC Bank

ICICI Bank

Tenure Normal rate Rate for Sr citizens Normal rate Rate for Sr citizens Normal rate Rate for Sr citizens
7 – 14 days

3.50%

4.00%

4.00%

4.50%

15 – 29 days

4.25%

4.75%

4.25%

4.75%

30 – 45 days

5.75%

6.25%

5.50%

6.00%

7 days – 45 days

5.75%

6.25%

46 – 60 days

5.75%

6.25%

5.75%

6.25%

61 – 90 days

6.25%

6.75%

6.00%

6.50%

91 days – 120 days

6.25%

6.75%

6.00%

6.50%

46 days – 179 days

6.25%

6.75%

121 days – 184 days

6.00%

6.50%

180 days – 210 days

6.35%

6.85%

6.75%

7.25%

7 months – 9 months

6.75%

7.50%

185 days – 289 days

6.50%

7.00%

9 months – < 1 Year

7.00%

7.50%

211 days – < year

6.40%

6.90%

290 days – < 1 year

6.75%

7.25%

1 Year – < 2 Years

6.70%

7.20%

7.25%

7.75%

1 year – 389 days

6.75%

7.25%

390 days – 2 years

7.00%

7.50%

2 years – 3 Years

6.75%

7.25%

7.10%

7.60%

7.00%

7.50%

3 years – 4 Years

6.80%

7.30%

7.10%

7.60%

7.25%

7.75%

4 years – 5 years

6.80%

7.30%

7.10%

7.60%

7.25%

7.75%

5 Years – 10 Years

6.85%

7.35%

6.00%

6.50%

7.00%

7.50%

Which tenure offers best return

Going by the rate of interest offered by the three of the biggest banks, it is clear that you will get highest interest rates on the deposits made from 1 to 5 years. While the rates are lower on deposits of less than 1 year before rising till 5 years and again dipping after 5 years tenure.

So, it is best for you to limit the tenure of deposits between 1 and 5 years in the present scenario.

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