Fixed deposits basically refer to granting fixed rates of interest on your deposit of money. The interest rates remain the same irrespective of the periods of booms or slumps the economy might go through causing a slash down or hike of interest rates, prices, consumption demand preferences of the customers. High fixed deposit interest rates are usually wanted since it guarantees a fixed amount of return or earning at some future date on the principal amount you wish to deposit. The longer you wish to tie your money up in bonds, the larger the interest yields. Fixed deposits are non-tax deductible meaning the time period for which you have kept your money in the bank or tied up in fixed bonds, you are not entitled to pay any taxes on the same or exempt from taxation. However, once you break the bond, it becomes a part of your net earnings and might be subject to taxes. Further, fixed deposits have special reservations for senior citizens and interest payment options. All of these make it a really viable and attractive option for storing money and making a profit off the same. If you are interested in knowing which bank offers the highest interest rates, read on.
Why do you need high FD rates?
Usually, in the post-pandemic situation, both bank interest rates and repo rates have been slashed. The investment sector also was affected adversely by the lack of funds or deposits and the entire market suffered huge losses. When interest rates were cut down to 3% or a maximum of 3.5% from a previous 5% or 6%, people became less willing to hold money in bonds or even invest the same. The lockdown ushered in periods of uncertainty regarding prices, demand and inflation; the economy entered into a recession and speculative demand for money increased. Under such circumstances, it became evident why high fixed deposit interest rates were required to keep afloat the bond market and a steady flow of money around the economy. Further, senior citizens who do not have any steady source of income and rely on the earnings of the pre-affixed deposit accounts feel the need for higher rates more intensely to maintain a certain standard of living and health.
Types of banks who offer high FD rates
Small-time companies like Bajaj finance offer more interest rates than nationalised banks like SBI. Even private players offer more than these banks. The main reason is that the nationalised banks mostly offer deposits for a longer time period and as such it wouldn’t be profitable for them to offer high interest for a prolonged period. On the other hand, most of the private lenders or companies can afford to hike interest rates of their short and medium-term bonds extending for only 2 to 3 months and as such, they can maintain their business and profit from the same as well.
Banks offering the highest interest rates
Below are listed the top banks that offer high interest rates.
Axis Bank offers the highest interest rate on fixed deposits which is 2.5% to 5.75% for general citizens per annum and 2.50% to 6.50% for senior citizens p.a. To avail the same all you need to do is get on the bank’s online website and apply for the fixed deposits account from the drop-down box. It is always advisable to go through their policy guidelines and the certificates or documents you need to have in order to be eligible to open the account. Further, they would require you to keep a minimum of rupees 10,000 as your principal amount or deposit on which you can earn the interest.
The second-highest interest rate on fixed deposits is offered by the HDFC Bank at 5.50% p.a. for a period of 5 years or more. It is however not a short term bond but more of a medium to long term bond. Further, the principal amount is also quite substantial, 20,000 or more. They offer higher rates to senior citizens.
Among the Popular banks, the highest interest rate is offered by Yes Bank for deposits under Rs. 2 crores and tenure of payment ranging between 7 to 10 years. For general citizens it is 6.50% p.a. whereas for senior citizens it is slightly higher, 7.50% p.a. For the latter the tenure of maturity is 5 to 10 years.
How to apply for the FD
You can start by visiting any bank’s website or online portal. There will be listed the eligibility criteria for the deposit applicant, your minimum age, details about your occupation, designation, residence and citizenship. Along with that, you might have to produce valid identity proof. There’s also an FD interest calculator which gives you an accurate approximation of your earnings from the FD. If you are through this step and find it satisfactory, you can apply or proceed further with your application for FD. Deposit a minimum principal amount and wait for a minimum of 7 days before you can earn from the interest receipts.
Now that you know the list of top banks that offer the highest interest rates on fixed deposits, go through each of these individually before choosing the bank you wish to entrust your money with.