Since the dawn of banking, Fixed Deposits have been popular. Risk averse investors found satisfaction by depositing their savings in Fixed Deposits and collecting the interest. There was a time when a 5 year Fixed Deposit with banks offered you as high as 10%. After demonetization on November 8th, 2106, banks were faced with a deluge of deposits, necessitating a cut in FD interest rates. There has been a fall in Fixed Deposit interest rates across banks.
Fixed Deposit interest rates vary between banks and across tenures. Within the same bank, each FD scheme carries a different rate of interest.
Here are the factors that impact the Fixed Deposit Rates in India
RBI Policies:
The Reserve Bank of India lays down the policies and guidelines to be followed by commercial and cooperative banks. The CRR and the Repo rate are notified by the RBI from time to time. Any change in the rate has a direct impact on the Fixed Deposit rates offered by banks.
A higher CRR means that banks have to keep a larger proportion of cash deposits with RBI. So, it accepts Fixed Deposits from public by offering a higher interest rate.
Credit Rating of The FD Scheme:
Banks offer different FD schemes to suit the needs of depositors. Those schemes carry a low risk offer lower but steady returns. On the other hand, there are schemes which are associated with a high risk factor, but pay higher interests. Before you choose to deposit, make sure that you choose a bank that enjoys a good credit rating.
Economic Factors:
Factors like inflation and recession affect Fixed Deposit rates. When the inflation rate is high, there is erosion in the purchasing power of money. To compensate for the interest loss on the loans lent. Banks and NBFC offer higher interest rates of fixed deposits.
Recession is characterized by economic slowdown. CRR is reduced and more cash is infused into the market. During recession, Fixed Deposit Rates in Banks fall.
Highest Interest Rate On Bank Fixed Deposits
FD interest rates vary between banks/NBFCs. It also varies depending on the deposit tenure. As a depositor, you want to maximise your returns, so you’ll choose a Fixed Deposit that offers the highest interest rate. Currently, new banks offer higher FD interest rates when compared to nationalised banks, who’ve imposed interest rate cuts after demonetisation. IDBI bank offers highest FD rate of 8.25% for a 366 days Fixed Deposit. So, this should be your choice if you want to earn maximum from your FD investment.
Latest Bank FD Interest Rates In India
There has been a revision in FD interest rates. The below mentioned table gives you an overview of the interest rates prevailing as on February 1st,2017.
Bank/NBFC Rate of Interest
Bajaj Finance Limited:
< 1 year 7.80%
2 -5 years 8.05%
Ratnakar Bank
< 1 year 7.50%
2 -5 years 7.70%
Karnataka Bank
180 days 7.15%
Bandhan Bank
<1 year 7.00%
1 - 5 years 7.50%
Dena Bank
<1 year 7.00%
2-5 years 7.25%
Online comparison helps you find the bank that offers the highest return on Fixed Deposit. However, interest should not be the only criterion to decide choice of the fixed deposit investment. Higher interest is also associated with a higher risk. Other factors like credit rating, taxation, and other benefits should also be considered. Once you’ve done all the necessary research, find something that suits your financial needs and lock in your money.