Public Sector Banks vs Private Banks: Who Offers Better RD Interest Rates in India?

What is a Recurring Deposit? 

A Recurring Deposit allows you to deposit a fixed amount every month into your account and earn interest on it at a fixed rate. It’s ideal for salaried individuals, students, or parents saving for future goals. 

Public Sector Banks vs Private Sector Banks: RD Interest Rate Comparison 

Bank Name	Bank Type	RD Interest Rate (1–5 years)
SBI	Public	6.50% – 7.00%
Bank of Baroda	Public	6.40% – 6.90%
PNB	Public	6.50% – 7.10%
HDFC Bank	Private	7.00% – 7.25%
ICICI Bank	Private	6.75% – 7.10%
Axis Bank	Private	6.80% – 7.20%
Feature	Public Sector Banks	Private Sector Banks
Interest Rates	Moderate	Slightly Higher
Customer Service	Standard	More Personalized
Branch Network	Widely Available	Urban-Focused
Online Experience	Improving	Generally Superior
Risk Factor	Very Low (Govt-backed)	Low (RBI-regulated)
Senior Citizen Benefits	Yes	Yes

Rates vary by tenure and customer category (general/senior citizen). Please verify with the bank before investing. 

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Key Differences Between Public and Private Banks for RDs 

Bank Name	Bank Type	RD Interest Rate (1–5 years)
SBI	Public	6.50% – 7.00%
Bank of Baroda	Public	6.40% – 6.90%
PNB	Public	6.50% – 7.10%
HDFC Bank	Private	7.00% – 7.25%
ICICI Bank	Private	6.75% – 7.10%
Axis Bank	Private	6.80% – 7.20%
Feature	Public Sector Banks	Private Sector Banks
Interest Rates	Moderate	Slightly Higher
Customer Service	Standard	More Personalized
Branch Network	Widely Available	Urban-Focused
Online Experience	Improving	Generally Superior
Risk Factor	Very Low (Govt-backed)	Low (RBI-regulated)
Senior Citizen Benefits	Yes	Yes

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Who Offers Better RD Rates? 

Private banks generally offer slightly higher RD interest rates than public sector banks, especially for specific tenures and customer segments. However, public sector banks provide stability, a wide network, and are often preferred by risk-averse investors. 

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Which One Should You Choose? 

Choose a Public Sector Bank if: 

1. You prefer government-backed security 

1. You live in a rural or semi-urban area 

1. You already have accounts or relationships with PSBs 

Choose a Private Sector Bank if: 

1. You want slightly higher interest 

1. You value mobile/internet banking experience 

1. You're comfortable managing everything digitally 

A good credit score can help you secure lower interest rates on loans and credit cards.

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FAQs on Public & Private Banks RD

• Which banks offer the highest RD interest rates in India ?

  Private banks like HDFC, Axis, and ICICI often offer higher RD interest rates compared to public banks, especially for certain tenures.

• Are recurring deposits safe in private banks?

  Yes. All scheduled banks in India are regulated by the RBI and covered under the Deposit Insurance and Credit Guarantee Corporation (DICGC) for up to ₹5 lakh.

• Do senior citizens get higher RD interest rates?

  Yes. Both public and private banks offer higher interest rates (usually 0.50% extra) on RDs for senior citizens.

• Can I open an RD online with both public and private banks?

  Yes. Most banks now offer online RD account opening through net banking or mobile apps.

• What is the minimum amount required to open an RD?

  You can start an RD with as low as ₹100 per month, depending on the bank’s policy.

• Which is better for RDs — public or private banks?

  Private banks may offer better rates and digital service. Public banks offer stability and a wider rural reach. Choose based on your priorities.

• Is interest earned on recurring deposits taxable?

  Yes. Interest earned from RDs is taxable under “Income from Other Sources.” TDS may apply if the interest exceeds the threshold.