FD rates in November 2024: Highest interest from private and public banks

For one-year fixed deposits, Bandhan Bank and IndusInd Bank lead with rates of 8% and 7.75%, respectively

Fixed deposit (FD) interest rates in India show subtle variations across banks, with differences influenced by deposit amount, tenure, and depositor age. Banks across the country offer competitive rates, but these vary slightly based on factors such as the term of the deposit and specific customer categories, such as senior citizens, who often enjoy higher rates.

 

For one-year deposits, Bandhan Bank and IndusInd Bank lead with rates of 8% and 7.75%, respectively. For three-year deposits under Rs 1 crore, DCB Bank and RBL Bank provide the highest rates among private sector banks, while most other banks offer a base rate of around 7% for similar tenures.

 

Top private sector bank fixed deposit rates, according to Paisabazaar:

 

1. Axis Bank

1-year: 6.70%

3-year: 7.10%

5-year: 7%

Highest rate: 7.25% (15 months to less than 2 years)

 

2. Bandhan Bank

1-year: 8.05%

3-year: 7.25%

5-year: 5.85%

Highest rate: 8.05% (1 year)

 

3. DCB Bank

1-year: 7.10%

3-year: 7.55%

5-year: 7.40%

Highest rate: 8.05% (19-20 months)

 

4. HDFC Bank

1-year: 6.60%

3-year: 7%

5-year: 7%

Highest rate: 7.40% (55 months)

 

5. IndusInd Bank

1-year: 7.75%

3-year: 7.25%

5-year: 7.25%

Highest rate: 7.75% (1-2 years)

 

6. RBL Bank

1-year: 7.50%

3-year: 7.50%

5-year: 7.10%

highest rate: 8.10% (500 days)

 

7. YES Bank

1-year: 7.25%

3-year: 7.25%

5-year: 7.25%

highest rate: 8% (18 months)

 

These banks offer flexibility for FDs with and without premature withdrawal facilities. However, FDs without premature withdrawal options often provide slightly higher rates due to the funds being locked in for a fixed period, allowing banks to utilise these funds more effectively.

 

Public sector bank fixed deposit rates

 

Public sector banks present a similar spread in rates, with certain banks like Central Bank of India and Punjab & Sind Bank offering rates above 7% for specific tenures.

 

Top public sector bank rates:

 

1. Bank of Baroda

1-year: 6.85%

3-year: 7.15%

5-year: 6.80%

highest rate: 7.30% (400 days - Bob Utsav)

 

2. Bank of Maharashtra

1-year: 6.75%

3-year: 6.50%

5-year: 6.50%

highest rate: 7.40% (333 days)

 

3. Central Bank of India

1-year: 6.85%

3-year: 6.75%

5-year: 6.50%

highest rate: 7.45% (444 days)

 

4. Punjab National Bank

1-year: 6.80%

3-year: 7%

5-year: 6.50%

highest rate: 7.25% (400 days)

 

5. Union Bank of India

1-year: 6.80%

3-year: 6.70%

5-year: 6.50%

highest rate: 7.40% (333 days)

 

Senior citizen benefits

 

Most banks offer a higher interest rate to senior citizens, usually 0.5% more than the standard rate, providing a better yield for those above 60 years of age. This additional rate compensates for the often fixed-income nature of senior investments.

 

Fixed deposit withdrawal options: How they impact interest rates

 

Fixed deposits (FDs) come in two main types: those with and without a premature withdrawal option. Generally, FDs without an early withdrawal facility offer higher interest rates. “The primary reason behind this difference lies in how banks manage their funds and the stability they gain when deposits remain for a guaranteed period,” explains Adhil Shetty, CEO of Bankbazaar.com.

 

Why do FDs without withdrawal options offer better rates?

 

Banks gain more certainty in fund management when deposits are locked in for the full term without the option for premature withdrawal. This security allows them to invest or lend the money more effectively, knowing it won’t be withdrawn unexpectedly. “When banks offer FDs without the option to withdraw before maturity, they gain more certainty in managing their funds. This stability enables them to pass on benefits to customers as slightly higher interest rates,” says Shetty.

 

On the other hand, FDs that permit premature withdrawal require banks to maintain a portion of funds ready for potential early withdrawals, limiting their flexibility in lending or investments. This restriction often results in slightly lower interest rates on FDs with withdrawal options, as banks need to retain liquidity.

 

Shetty provides an example comparing a 5-year FD with and without the premature withdrawal option. “A bank might offer an interest rate of 7.0% per annum on an FD with a withdrawal option, while offering 7.5% on an FD without it. For a deposit of Rs 1,00,000, this difference translates to a maturity amount of approximately Rs 1,41,478 for the FD with the withdrawal option, versus around Rs 1,44,995 for the no-withdrawal FD,” he explains.

 

This difference of Rs 3,517 over five years incentivises depositors to choose the full-term commitment, benefiting both the depositor, with higher returns, and the bank, with more stable funds for its financial activities.

 

Points to consider

 

Lock-in period: Choose a tenure that matches your financial goals.

Interest rate variations: Rates differ across banks, so compare options before investing.

Penalties: Be aware of penalties for premature withdrawal if flexibility is essential.

 

Fixed deposits provide a reliable option for risk-averse investors, though rates and options vary across banks and tenures. Investors can explore options based on their preference for flexibility, tenure, and rate.

 

How is FD interest taxed in India?

 

The tax on fixed deposits is based on the interest earned, not the principal amount. "The interest is added to your total income and taxed according to your income tax slab," says Shetty. He adds, "If the interest exceeds Rs 50,000 for senior citizens (Rs 40,000 for others), the bank deducts 10% TDS. Without a PAN, this rises to 20%."

 

Let's consider Shradha, a 33-year-old Delhi resident who earns Rs 75,000 annually from her FD interest.

 

Total interest earned: Rs 75,000

TDS threshold: Rs 40,000 for general citizens

TDS deducted by the bank: 10% of Rs 75,000 = Rs 7,500

 

Shradha's total interest of Rs 75,000 will be added to her taxable income and taxed according to her slab rate. However, if her total income is below Rs 2.5 lakh, she won't need to pay any additional tax. To avoid TDS deductions, she can submit Form 15G at the start of the financial year, declaring her income below the taxable limit, which will prevent the bank from deducting TDS upfront.