Floating Rate Fixed Deposit
A floating rate term deposit (FRTD) is a type of fixed deposit (FD) in which the interest rate changes in lockstep with a reference rate that is adjusted on a regular basis, rather than being fixed for the duration of the deposit.
With this type of fixed deposit, you can avail yourself of the benefits of fluctuating interest rates without the need to close and re-book your fixed deposit.
A floating rate term deposit may be the ideal investment option for individuals who can wager on the direction of inflation and interest rates in the future. The interest rates on this fixed deposit are linked with the Treasury Bill rates of the bank.
These Treasury Bill rates are auctioned once every two weeks on the Reserve Bank of India (RBI) website, and with a mark-up that is adjusted once annually. Read on to know more about a floating rate term deposit including its features, benefits, and more.
Features of Floating Rate Fixed Deposit
The features of a floating rate term deposit are as follows:
- Single or joint investors, minors, and Karta of Hindu Undivided Family (HUF) can open a floating rate term deposit.
- The minimum deposit amount is Rs.10,000 and the maximum deposit amount is less than Rs.1 crore.
- The interest rates are linked to the average yield at the RBI's 91-day Treasury Bills auctions held in the previous three months. This will be changed every quarter.
- Unlike a standard fixed deposit, the interest rates are variable and not fixed. Thus, the Confirmation of Deposit (COD) has no maturity value.
Benefits of Floating Rate Fixed Deposit
A floating rate term deposit comes with the following benefits:
- A floating rate term deposit pays interest each quarter on the last day of every month.
- You can avail yourself of a loan or an overdraft against your floating rate term deposit. You can get an overdraft or loan equal to up to 90% of the FRTD amount.
- Senior citizens can benefit from additional interest rates.
- The interest rates are reset every three months, on the first of April, July, October, and January of each year.
- A nomination facility is available for free.
List of Banks Offering Floating Rate Fixed Deposit
Here are the top banks that offer floating rate term deposits:
- IDBI Bank
- YES Bank
IDBI Bank Floating Rate Fixed Deposit Rates
- IDBI Bank offers floating rate term deposits for tenures ranging from 1 year to 20 years.
- The interest rate is anchored to the average yield of the 91-day Treasury Bill auctions which is reset every calendar quarter by the RBI.
Tenure | Mark-up on average rate | General Public Interest Rates | Senior Citizen Interest Rates |
1 year | 0.50% | 6.97% | 7.47% |
2 years | 0.50% | 6.97% | 7.47% |
3 years | 0.50% | 6.97% | 7.47% |
5 years | 0.40% | 6.87% | 7.37% |
7 years | 0.20% | 6.67% | 7.17% |
10 years | 0.20% | 6.67% | 7.17% |
More than 10 years – 20 years | 0.10% | 6.57% | 7.07% |
Note: The interest rates mentioned in the table above are effective from 1 January 2025 to 31 March 2025.
YES Bank Floating Rate Fixed Deposit Rates
- YES Bank offers floating rate term deposits for tenures ranging from one year to less than 20 years.
- For the general public, the bank offers an interest rate of 6.50% on tenures of one year to less than 18 months and 6.88% on tenures of 18 months to less than three years.
- Senior citizens are offered an additional interest rate of 0.50% for deposits less than Rs.2 crore and 0.45% for deposits of Rs.2 crore to less than Rs.5 crore.
The interest rates offered on the Floating Rate Fixed Deposit less than Rs.5 crore are mentioned are as follows:
Tenure | Interest Rate |
1 year - less than 18 months | 7.60% |
18 months - less than 3 years | 8.10% |
Here are the interest rates for the Floating Rate Fixed Deposit of Rs.10,000 to less than Rs.2 crore offered to senior citizens:
Tenure | Interest Rate |
1 year to less than 18 months | 8.10% |
18 months to less than 36 months | 8.60% |
Given below are the Floating Rate Fixed Deposit of Rs.2 crore to less than Rs.5 crore offered to senior citizens:
Tenure | Interest Rate |
1 year to less than 18 months | 8.05% |
18 months to less than 36 months | 8.35% |
Fixed Rate FD vs Floating Rate FD
Fixed Rate FD | Floating Rate FD |
Fixed rate FDs are investments made at the current fixed interest rate, which remains constant until maturity. | The interest rates on floating rate FDs are linked to a benchmark instrument's reference rate. Thus, they are variable during the tenure and are revised in accordance with the underlying reference rate. |
Fixed rate FDs are easy to understand. | Floating rate fixed deposits may be a little complex to understand. |
The interest rates on fixed rate FDs are comparatively higher. | The interest rates on floating rate FDs are lower when compared to fixed rate FDs. |
FAQs on Floating Rate Fixed Deposit
- What is a floating rate fixed deposit?
A floating rate fixed deposit is a type of fixed deposit in which the interest rate changes with market rates rather than being fixed for the entire duration. Banks utilise their base lending rate as an index, and deposit rates are adjusted on a regular basis.
- What are the minimum and maximum deposit amounts for a floating rate fixed deposit?
For a floating rate fixed deposit, the minimum deposit amount is Rs.10,000 and the maximum deposit amount is less than Rs.1 crore.
- Why are floating interest rates higher than fixed interest rates?
If interest rates decrease, you will be able to repay your debt sooner if your payments remain constant. Because the rate is fluctuating, it may climb above fixed-term rates. If interest rates rise, your expenses will increase as well, which will put a burden on your budget.
- Who can open a floating rate fixed deposit?
Single or joint investors, minors, and Karta of HUF can open a floating rate term deposit.
- Can I open a floating rate fixed deposit online?
Yes, you can open a floating rate fixed deposit online.
- Do senior citizens get an additional interest rate on floating rate fixed deposits?
Yes, senior citizens get an additional interest rate on floating rate fixed deposits.
- Is a nomination facility offered on a floating rate fixed deposit?
Yes, banks offer a nomination facility on a floating rate fixed deposit.
- Can I avail loans against my floating rate fixed deposit?
Yes, you can avail yourself of loans against your floating rate fixed deposit.
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