10 private banks offering the highest FD returns for tenures up to 5 years

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Updated: August 01, 2021 1:19 PM

If you’re planning to invest in an FD, here’s a list of 10 private banks that are currently offering the highest interest rates on normal FDs for tenures up to 5 years.

There are still a few private and small finance banks that are currently offering above-average FD interest rates.

Investment ease and clarity, guaranteed 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 who often rely on their FD returns even for their day-to-day expenses.

However, with the Reserve Bank of India keeping the repo rate unchanged at a low of 4% for over a year now, many banks have reduced their FD interest rates. This, coupled with the fact that FD returns are fully taxable according to the tax slab rate of investors could further lower the real rate of returns – something that has been a worrying trend for the investors.

That being said, there are still a few private and small finance banks that are currently offering above-average FD interest rates. Investors could consider parking a portion of their funds with the FDs of these banks after a thorough risk assessment, especially if doing so is in line with their returns expectations and risk tolerance.

Investors could also deploy what is termed as the ‘FD laddering’ technique to maximise investment benefits. Under this technique, you can break your investment fund to invest in multiple FDs (ideally with a few banks) with different tenures and build an investment loop instead of parking your entire funds in a single FD, according to BankBazaar.

For example, if you want to invest Rs 5 lakh, then instead of investing it all in a single FD for 5 years, you can break the corpus into five FDs of Rs 1 lakh each. The first FD could have a tenure of 1 year, the second for 2 years, the third for 3 years, the fourth for 4 years and the fifth for 5 years. You should also reinvest your FDs, if feasible, upon maturity to create an investment loop. This would allow you to benefit from any higher returns offer in the future while minimising the need to pre-close an FD after losing interest income to meet any requirement.

So, if you’re planning to invest in an FD, here’s a list of 10 private banks — including Yes Bank, Axis Bank, RBL Bank and DCB Bank — that are currently offering the highest interest rates on normal FDs amounting to less than Rs 1 crore for tenures up to 5 years. Do note, senior citizen depositors usually get preferential rates by up to 50 basis points over and above the normal rates.

10 Private Banks Offering the Highest FD Returns for Tenures up to 5 Years

Disclaimer: Data as on respective banks’ websites on July 23, 2021. All interest rates for non-senior-citizen fixed deposits amounting to less than Rs 1 crore.
Data compiled by BankBazaar.com, an online marketplace for loans, credit cards and more.

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