5 Years Fixed Deposit Interest Rates

Fixed deposits are one of the safest investment options available out there for individuals even if the returns on these are not guaranteed as interest rates keep changing. However, Fixed Deposits are still quite a popular option when it comes to investments. As the name suggests, this deposit is for a period of five years and an interest is added to the deposit. This deposit also qualifies for tax exemptions under Section 80C of the Income Tax Act of 1961.

Key Features of Five Year Deposit Interest Rates

• This deposit offers tax exemptions under Section 80C of the Income Tax Act.
• A lock-in period of 5 years is offered in this type of deposit.
• Individuals will not be permitted to withdraw their deposit before the maturity period.
• Banks providing these deposit schemes decide the interest rate that is applicable for them.
• Overdraft or sweep facility is not available for the same.
• After a lock-in period of five years, individuals can renew their deposit account.
• Interest earned under this account can be taxed, however.

Five Year Fixed Deposit Interest Rates

The rate of interest charged on a particular fixed deposit account is decided by the bank that is offering it. Interest rates on these accounts are compounded monthly/quarterly/half-yearly or yearly.

Interest Rates for the Top Five Fixed Deposits in India

• Currently, although a number of banks provide fixed deposits with a tenure of 5 years, the bank that provides the highest rate of interest is The Ratnakar Bank which provides an interest rate of 8.25%.
• Following The Ratnakar Bank is DCB Bank which offers a rate of interest of 7.90% and other benefits.
• Lakshmi Vilas Bank offers a fixed deposit account with a number of benefits and features at an attractive interest rate of 7.80%.
• Tamilnad Mercantile Bank provides fixed deposits with tenures of 5 years and above with a rate of interest of 7.80%.
• Bandhan Bank provides fixed deposit options with an interest rate of 7.75% with a wide variety of benefits and features.

Calculation of Interest on Five Year Fixed Deposit

Interest rates charged on a fixed deposit account will vary based on the bank offering it. Although they fall within a general percentage spectrum, the rates will vary slightly. These rates of interest will be compounded annually/semi-annually/quarterly or monthly. Generally, customers are advised to opt for a deposit wherein rates of interest are compounded monthly as these provide higher returns as compared to that of annual, semi-annual or quarterly deposits.

For example, if a bank offers a rate of interest of 9.25% for a deposit that is being compounded yearly, then the same account, if being compounded quarterly, will provide an interest rate of 9%. Assuming the deposit value is Rs.2 lakhs, then a deposit account being compounded every quarter will provide a return of Rs.3.12 lakhs whereas a deposit being compounded yearly will provide a return of Rs.3.11 lakhs.

Although interest rates are a deciding factor when it comes to deciding which bank to procure a 5 year fixed deposit scheme from, it should not overshadow other criteria. The frequency of interest compounding should also be considered while deciding on a particular scheme.

Also, high rates of interest may or may not mean that the money will be safe. The reputation of the bank is also another factor that needs to be looked into. If individuals are applying for a fixed deposit for 5 years, then it is better they opt for a reliable bank or a reputed one. Individuals might also end up losing their money even if a slight mistake is made.

Who can apply for the Five Year Fixed Deposit Scheme?

The following individuals can apply for a Five Year Fixed Deposit Scheme-

• Indian residents who have a PAN card
• NRIs
• Senior Citizens

Updated on 15 July 2016