The interest rates on FDs offered by public sector banks are not as competitive as rates offered by private and small finance banks.
Banks have raised interest rates on fixed deposits (FDs) across investment tenures after six consecutive repo rate hikes by the Reserve Bank of India (RBI). The cumulative rate hike is 250 basis points (one basis point is one-hundredth of a percentage point) in this financial year to curb rising inflation. The smaller private banks and small finance banks offer the highest interest rates followed by a foreign bank for FDs with a three-year tenure. Comparatively, the public sector banks have lagged behind. The average interest rate of the top 10 banks is 7.5 percent for FDs with a tenure of three years, according to data compiled by BankBazaar.
Fixed deposits offer liquidity and assured interest income at regular intervals. Thanks to the ample liquidity they promise, FDs can be useful while building an emergency corpus. Here are the top 10 banks offering the best interest rates on FDs for a tenure of three years.
DCB Bank offers 7.85 percent interest on FDs with three-year tenures. Among the private banks, it offers the highest interest rate. An investment of Rs 1 lakh will grow to Rs 1.26 lakh in three years.
AU Small Finance Bank and Equitas Small Finance Bank offer 7.75 percent interest on FDs. Among small finance banks, these banks offer the best interest rates. The rate is applicable on investments with of up to three years. A sum of Rs 1 lakh invested in this fixed deposit will grow to Rs 1.26 lakh in three years.
Among foreign banks, Deutsche bank offers the best interest rates. Deutsche Bank and IDFC First Bank offers 7.50 percent interest on FDs of three year tenure. A sum of Rs 1 lakh invested in FDs of these banks grows to Rs 1.25 lakh in three years.
Among public sector banks, Union Bank offers the most remunerative interest rate. It offers a 7.30 percent interest rate for an investment of Rs 1 lakh. The investment tenure is three years.
Bandhan Bank, City Union Bank, IndusInd Bank and Suryoday Small Finance Bank offer 7.25 percent interest on FDs with three-year tenures. The interest rate is applicable on an investment of RS 1 lakh.
Smaller private banks and Small Finance Banks are offering higher interest rates to garner newer deposits. The Deposit Insurance and Credit Guarantee Corporation, a subsidiary of the central bank, guarantees investments in fixed deposits of up to Rs 5 lakh.
The data on FDs is as of February 15, 2023, for three-year term deposits (non-senior citizens and deposits below Rs 1 crore), as given on bank websites. All listed (BSE) public and private banks and foreign banks are considered for data compilation. Banks for which verifiable data is not available have not been considered. For all FDs, quarterly compounding of interest is assumed.