Banks Revise FD Rates

Axis Bank has revised its fixed deposit (FD) rates with effect from May 29, 2019. This comes just weeks after the State Bank of India, country’s largest public sector bank, revised its term deposit rates with effect from May 9, 2019. Axis Bank offers 7 days to 10 years maturity across different amounts---for below Rs 5 crore and between 11 months and less than one year maturity, the bank offers rate at 7.10%. While for 5 to 10 years maturity, it offers rate at 7%. Overall, the bank has made changes in interest rates on domestic deposits with less than Rs 5 crore of different tenures.

What is fixed deposit?

When it comes to investments, Indians prefer either something tangible like gold or real estate, or something with guaranteed tenure and interest rate.

“A fixed deposit is a financial investment that provides guaranteed, by the deposit taking entity, returns over a specific period of time or tenure. Rs 10,000 invested in an FD for 1 year with a 10% interest is guaranteed to deliver Rs 11,000 at the end of one year. From a taxation perspective, the interest earned will be taxed at the slab rate of the tax payer, meaning that it is fully taxable,” said Srikanth Meenakshi, Co-founder and COO of FundsIdia.com.

Who can opt for FD?

Meenakshi further explains that investors with low risk appetite can opt for FDs as it carries practically zero risk, except in the case of default by the issuing entity. Bank FDs are especially considered the ultimate safe investment in India. Deposits are also issued by corporate entities like Shriram, HDFC, and Mahindra, but the risk profile of such FDs are higher than bank FDs.

How long to stay invested?

Most of the investors are unaware of when they should stop FDs or when to switch to any other instrument. Meenakshi explained, “The best use of an FD would be for parking money for upto a year. Beyond that, it would be better to invest in low-risk mutual funds that offer more liquidity and potentially higher returns.”

FD rates of major banks

Now let us take a look at different rates of fixed deposits that different banks offer.

Axis Bank

The rates vary in the range of 3.50-7.30% per annum, depending upon the tenure and deposit amount. For example, for 11 months to less than 1 year’s tenure and below Rs 2 crore deposit, the bank provides 7.10% rate after new rates came into effect from May 29, 2019. For senior citizens, in less than 1 year’s tenure category, the bank provides fixed deposits at 7.35% rate for below Rs 2 crore deposit. For less than Rs 1 crore, its deposit rate is 7.00%, according to the bank’s website.

HDFC Bank

Last year, the HDFC Bank hiked its fixed deposit rates by upto 60 basis points across all maturities. The new rates came into effect from August 6, 2018. For 1 year tenure and less than Rs 1 crore, the bank provides FD at 7.30% rate. Similarly, for senior citizens in the same tenure and amount category, the bank provides FD at 7.80%. For 7 to 14 days category, the bank provides FD at 3.50% rate. For senior citizens the rate is 4%, according to the bank’s website. For 6 months’ maturity, the banks provide FD at 6.25% and for the senior citizens the rate is 6.75%.

State Bank of India

The country’s largest public sector bank also revised its rate of return twice this year. The bank provides fixed deposit rates in the range of 7 days to 10 years’ maturity in the range of 5.75-7%. The bank revised fixed deposit rates from May 9, 2019 onwards. The bank has increased rate of return from 6.80% to 7% for a maturity of one year to less than 2 years. In the same category, the rate for senior citizens is at 7.50%.

ICICI Bank

One of the largest private sector lenders, the ICICI Bank offers FD returns in the range of 7 days to 10 years’ maturity. For Rs 1 crore deposit and for 290 days to 364 days maturity, the bank offers return at 6.75% rate. This means if you have invested Rs 1 crore for eleven months, at maturity you will get a return of Rs 6,37,267.62 or over Rs 6.37 lakh. The total amount along with return will be more than Rs 1.0637 crore. For tenure of one year to 389 days the bank offers return at 6.92% rate and for senior citizens in the same category the rate is 7.40%.

Bank of Baroda

One of the largest public sector lenders, the Bank of Baroda offers return at 6.70% for less than Rs 1 crore deposit, with 1 year’s maturity. For senior citizens in the same category, the bank rate stands at 7.30%. Similar to other banks, the tenure ranges between 7 days to 10 years. For 271-364 days, the bank offers 6.50% rate of return and for senior citizens the rate is 7%, according to the bank’s website.