The returns on an FD account can vary due to many factors depending on the type of the FD account, financial institution, age of the investor, tenure of the account, etc. Most financial institutions follow the RBI’s guidelines while offering the interest rates on the FD accounts, however, if the deposit amount is higher, the financial institution may decide to offer a slightly higher interest rate. Additionally, the tax-free FDs offer tax benefits under the Section 80C of the Income Tax Act, 1961. FDs are widely sought for many other benefits such as the availability of a loan against the FD account itself. Most banks and non-banking financial companies (NBFCs) offer a loan up to a maximum of 90% of the account value at a lower interest rate compared to any other unsecured loan in the market. An FD account can be opened for a minimum of 7 days up to a maximum of 10 years or more, IDBI Bank is one among the few financial institutions to offer FD accounts for 20 years.
Guaranteed returns on FDs
FD accounts have been a popular choice of investment among conservative investors since its safe and also provide the protection of an insurance. The insurance for up to Rs.1 lakh for the principal and accrued interest is applicable for all FD account following the RBI’s directive. Based on the tenure of the FD account, the age of the investor, deposit amount, and various other factors, the rate of return may change.
Currently, there are many banks and NBFCs who offer a different rate of return than the other. Few of the financial institutions who offer the highest rate of returns are listed in the following table:
Banks and NBFCs offering a higher rate of return on fixed deposit accounts
|Financial Institution||Fixed Deposit Tenure for deposit below Rs.1 crore|
|1 Year||2 Years||3 Years||4 Years||5 Years|
|Mahindra and Mahindra Finance||7.50%||7.50%||7.55%||7.55%||7.55%|
|Tamilnad Mercantile Bank||7.00%||7.00%||7.00%||7.00%||7.00%|
|Lakshmi Vilas Bank||6.50%||7.00%||7.00%||7.00%||7.00%|
|Jammu and Kashmir Bank||6.50%||6.75%||6.50%||6.50%||6.50%|
|State Bank Of India||6.90%||6.95%||6.85%||6.50%||6.50%|
Most banks and NBFCs offer a higher rate of return for senior citizens. These FD interest rates are applicable for domestic deposits where the deposit amount doesn’t exceed Rs.1 crore. The above listed financial institution open FDs for NRIs as well for which the rate of return varies based on various other factors.
Changes to the rate of return – Though the financial institutions follow the rates specified by RBI, they are subject to change. Individuals are advised to get in touch with the respective bank or the NBFC to obtain the latest FD interest rate before making any investment decision.
High interest rates of more than 9% are being offered on FDs by a number of small finance banks such as Utkarsh, ESAF and Fincare, among others.
ESAF Small Finance Bank pays interest at the rate of 9% on all FDs that are held for a period that ranges from 1 year to less than 2 years. Senior citizens will be eligible for higher rate of interest, which is 9.5% for the same time period. On the other hand, Utkarsh Small Finance Bank is offering an interest rate of 8% on all FDs for individuals and 8.5% for senior citizens.
05th December 2017