What is a Fixed Deposit?

Fixed deposit (FD), also referred as ‘time deposit’ or ‘term deposit’, is an investment option that allows depositors to park their idle money for a fixed period and earn fixed interest on it at regular intervals during the chosen tenure or at maturity. It offers income certainty and capital protection, making it a popular investment choice, especially among new and conservative investors. These features also make fixed deposits an ideal instrument for realizing short-term financial goals and for parking emergency and post-retirement corpuses.

FD Interest Rates

Small Finance Banks and NBFCs offer the highest FD interest rates. Following them are PSU Banks and large Private Sector Banks. However, Private Sector Banks like Bandhan Bank, DCB Bank, Tamilnad Mercantile Bank, RBL Bank, IDFC First Bank, IndusInd Bank, Yes Bank, SBM Bank, CSB Bank and Federal Bank offer higher FD slab rates than the fixed deposit rates offered by other Private Sector Banks. FD interest rates of scheduled banks range from 2.50% p.a. to 9.00% p.a. for the regular depositors for tenures ranging from 7 days to 10 years. Senior citizens are usually offered an additional interest of 0.50%-0.75% p.a. above the applicable FD card rates.

Fixed Deposit Interest Rates of Small Finance Banks
Bank Name Highest slab % 1-year tenure 1 % 3-year tenure 3 % 5-year tenure 5 %
AU Small Finance Bank 8.00 6.75 8.00 7.25
Capital Small Finance Bank Limited 7.50 7.50 7.15 7.10
Equitas Small Finance Bank 8.50 8.20 8.00 7.25
ESAF Small Finance Bank 8.50 6.00 6.75 6.25
Fincare Small Finance Bank 8.51 7.50 8.00 8.00
Jana Small Finance Bank 8.50 8.00 8.50 7.25
North East Small Finance Bank 8.50 6.50 7.25 6.25
Shivalik Small Finance Bank Limited 8.00 7.50 8.00 7.00
Suryoday Small Finance Bank 8.60 6.85 8.60 8.25
Ujjivan Small Finance Bank 8.25 8.25 7.20 7.20
Unity Small Finance Bank 9.00 7.35 7.65 7.65
Utkarsh Small Finance Bank 8.50 8.00 8.50 7.50

Fixed deposit rates as of 13 September 2023

FD Interest Rates of Private Sector Banks
Bank Name Highest slab % 1-year tenure 1 % 3-year tenure 3 % 5-year tenure 5 %
Axis Bank 7.10 6.75 7.00
Bandhan Bank 7.85 7.25 7.25 5.85
City Union Bank 7.00 6.75 6.50 6.25
CSB Bank 7.35 5.00 5.75 5.75
DBS Bank 7.50 6.25 6.50 6.50
DCB BANK 7.75 7.15 7.60 7.40
Dhanlaxmi Bank 7.25 6.75 6.50 6.60
Federal Bank 7.30 6.80 6.60 6.60
HDFC Bank 7.25 6.60 7.00 7.00
ICICI Bank 7.10 6.70 7.00 7.00
IDBI Bank 7.15 6.80 6.50 6.50
IDFC First Bank 7.50 6.50 7.25 7.00
IndusInd Bank 7.50 7.50 7.25 7.25
Jammu & Kashmir Bank 7.10 7.10 6.50 6.50
Karnataka Bank 7.30 7.00 6.50 6.50
Karur Vysya Bank 7.50 7.00 7.00 6.50
Kotak Mahindra Bank 7.25 7.10 6.50 6.20
Nainital Bank 7.05 6.70 6.25 5.75
RBL Bank 7.80 7.00 7.10 7.10
SBM Bank India 7.75 6.25 7.30 7.75
South Indian Bank 7.20 6.60 6.50 6.00
Tamilnad Mercantile Bank 7.00 7.00 6.50 6.50
Yes Bank 7.75 7.50 7.25 7.25

Fixed deposit rates as of 13 September 2023

FD Rates for Public Sector Banks

Fixed deposit rates as of 13 September 2023

Bank Name Highest slab % 1-year tenure 1 % 3-year tenure 3 % 5-year tenure 5 %
Bank of Baroda 7.25 6.75 7.05 6.50
Bank of India 7.25 6.00 6.50 6.00
Bank of Maharashtra 7.00 6.35 6.00 5.75
Canara Bank 7.25 6.90 6.80 6.70
Central Bank of India 7.15 6.75 6.50 6.25
Indian Bank 7.25 6.10 6.25 6.25
Indian Overseas Bank 7.25 6.50 6.50 6.50
Punjab & Sind Bank 7.40 6.40 6.00 6.00
Punjab National Bank 7.25 6.75 7.00 6.50
State Bank of India 7.10 6.80 6.50 6.50
UCO Bank 7.05 6.50 6.30 6.20
Union Bank of India 7.00 6.30 6.50 6.70
Fixed Deposit Rates – Tax Saving FD

Fixed deposit rates as of 8 September 2023

FD Interest Rates of Leading Foreign Banks
Banks General Citizens % Senior Citizens %
AU Small Finance Bank 7.25% 7.75%
Axis Bank 7.00% 7.75%
Bandhan Bank 5.85% 6.60%
Bank of Baroda 6.50% 7.15% – 7.50%
Bank of India 6.00% 6.75% (6.90% for super senior citizens)
Bank of Maharashtra 5.75% 6.25%
Capital Small Finance Bank Limited 7.10% 7.75%
Central Bank of India 6.25% 6.75%
DCB Bank 7.40% 7.90%
Federal Bank 6.60% 7.25%
Fincare Small Finance Bank 8.00% 8.60%
HDFC Bank 7.00% 7.50%
ICICI Bank 7.00% 7.50%
IDBI Bank 6.50% 7.00%
IDFC First Bank 7.00% 7.50%
Indian Bank 6.10% – 6.25% 6.60% – 6.75%
Indian Overseas Bank 6.50% 7.00%
IndusInd Bank 7.25% 8.00%
Jammu & Kashmir Bank 6.50% 7.00%
Jana Small Finance Bank 7.25% 7.75%
Karnataka Bank 6.50% 6.90%
Kotak Mahindra Bank 6.20% 6.70%
Karur Vysya Bank 5.90% 5.90%
Punjab & Sind Bank 6.00% 6.50%
Punjab National Bank 6.50% 7.00%
RBL Bank 7.10% 7.60%
SBM Bank India 7.75% 8.25%
Shivalik Small Finance Bank Limited 7.00% 7.50%
South Indian Bank 6.00% 6.50%
State Bank of India 6.50% 7.50%
Suryoday Small Finance Bank 8.25% 8.75%
Tamilnad Mercantile Bank 6.50% 7.00%
UCO Bank 7.20% 7.70%
Ujjivan Small Finance Bank 7.20% 7.80%
Union Bank of India 6.70% 7.20%
Utkarsh Small Finance Bank 7.50% 8.10%
Bank Name Highest slab 1-year tenure (%) 3-year tenure (%) 5-year tenure (%)
Deutsche Bank 7.75 7.00 7.75 7.50
HSBC Bank 7.25 4.00 7.00 6.00
Standard Chartered Bank 7.50 7.15 7.10 6.75

Fixed deposit rates as of 13 September 2023

Company/Corporate Fixed Deposit Rates
Company Name 1-year tenure 3-year tenure 5-year tenure Tenure range Additional interest rate for senior citizen (p.a.)
Bajaj Finance Limited 7.40% 8.05% 8.05% 12-60 months
ICICI Home Finance 7.00% 7.45% 7.30% 12-120 months 0.25%
Kerala Transport Development Finance Corporation 7.00% 7.00% 6.75% 12-60 months 0.25%
LIC Housing Finance Ltd. 7.25% 7.75% 7.75% 12-60 months 0.25%
Mahindra Finance 7.40% 7.70% 7.75% 12-60 months 0.25%
Manipal Housing Finance Syndicate Ltd. 8.25% 8.25% 7.75% 12-60 months -
Muthoot Capital Services Limited 6.25% 6.75% 7.25% 12-60 months 0.25%
PNB Housing Finance Ltd. 7.35% 7.70% 7.50% 12-120 months 0.25%
Shriram Finance Ltd.* 7.34% 7.95% 8.18% 12-60 months 0.50%
Sundaram Home Finance 7.45% 7.75% 7.90% 12-60 months 0.50%
Sundaram Finance 7.45% 7.75% 12 to 36 months 0.35%

*At Monthly Rests. Additional interest of 0.25% p.a. is applicable on all renewals where the deposit is matured.

Fixed deposit interest rates as of 13 September 2023

Why Invest in FD?
1. Guaranteed Returns on Investment

FD interest rates booked at the time of opening an Fixed Deposit account remains the same till its maturity, regardless of any changes in the banks’ FD card rates in the interim. For instance, if an individual opens a bank fixed deposit of 3 years tenure at 6% p.a., the interest rate will remain the same till the completion of its 3 years tenure. This offers a high degree of income certainty in FDs, even higher than those offered by most small saving schemes.

2. Capital Protection

Fixed deposits booked with the scheduled banks are covered under the deposit insurance program of DICGC, a subsidiary of RBI. The insurance cover is applicable on cumulative bank deposits, which include fixed deposits, savings account, recurring deposits and current account, of up to Rs 5 lakh per bank per depositor, in case of bank failure.

3. Tax Deduction under Section 80C

Many banks and NBFCs offer 5-year tax-saving FD scheme with lock-in period of 5 years. The principal component of up to Rs 1.5 lakh each financial year can be claimed as tax deductions u/s 80C of the Income Tax Act. However, the interest component is taxed as per the tax slab of the depositor.

4. Loan against Fixed Deposit (FD)

Depositors can leverage their FDs to avail loans. Loans against FD are usually offered in the form of overdraft facility, wherein the credit limit is sanctioned on the basis of the Fixed Deposit amount pledged as collateral and the interest is also levied only on the amount drawn till its repayment. Moreover, the borrower continues to earn interest on the pledged FDs during the loan tenure. Withdrawals can be made anytime up to the credit limit from their overdraft account and repay it as per their repayment capacity. These features of loans against FDs make them an excellent tool for mitigating frequent liquidity and cash flow mismatches, without requiring prematurely closing FDs and incurring premature withdrawal penalties.

5. Credit Card against Fixed Deposit

Depositors having nil or low credit score can leverage their Fixed Deposits to avail secured credit cards. As the transactions made through secured cards are reported to the credit bureaus, disciplined usage of secured credit cards can help in building or improving one’s credit score. Such cards can also be helpful for those who fail to avail regular credit cards due others reasons like inadequate income, unserviceable location, employer’s profile or job profile. Corporate Banker, in partnership with SBM Bank (India) Ltd., issues credit card against FD – Step UP Credit Card. It’s a secured credit card issued against fixed deposits opened with SBM Bank. The card is a credit score builder best suited for consumers lacking credit access due to ‘no’ or ‘damaged’ credit history. Other features available on this credit card includes 100% credit limit on the fixed deposit amount and the facility to use the virtual credit card as soon as the Fixed Deposit is booked. The credit card also comes with attractive offers and discounts from top brands like Zomato, Swiggy, Nykaa, BookMyShow, Big Basket, Lifestyle, Yatra, Croma, Reliance Digital, etc.

Frequently Asked Questions (FAQs)
Q. Who can invest in an FD scheme in India?

A. Resident individuals, private and public limited companies, Hindu Undivided Families (HUF), partnership firms, societies, governments, local bodies, etc. can book fixed deposits.

Q. What are the minimum and maximum terms of Fixed Deposit schemes?

A. The tenure of FD schemes usually varies from 7 days to as long as 10 years. However, NBFCs offer Fixed Deposit investment for a period ranging from 12 months to 60 months and HFCs offer Fixed Deposit tenures of 12 months to 120 months of fixed deposits.

Q. What is the minimum lock-in period for a tax-saving FD?

A. Tax-saving Fixed Deposit schemes have a lock-in period of 5 years.

Q. What is the minimum deposit amount allowed for opening an FD?

A. The minimum amount set by banks and NBFCs for opening a fixed deposit is generally set at Rs. 1,000. Public sector banks may have lower minimum deposit criteria while some large private sector banks have set minimum deposit requirement of Rs 5,000. However, a tax-saving 5-year fixed deposit can be opened with an amount as low as Rs. 100.

Q. How much tax is deducted on FD interest income?

A. TDS @10% is levied on interest income of more than Rs. 40,000 for regular individuals and Rs. 50,000 for senior citizens. For Company/Corporate Fixed Deposits, this limit has been set at Rs. 5,000.

Q. Is it compulsory to submit a PAN to open an FD?

A. Yes. It is compulsory to quote your PAN when applying for a fixed deposit. However, if you do not have a PAN, you need to submit duly filled Form 60/61 (not being a company or a firm).

Q. Is it safe to open Fixed Deposit in small finance banks?

A. Yes. Small finance banks are regulated by the Reserve Bank of India. Also, deposit insurance of up to Rs. 5 lakh by DICGC is provided on these fixed deposits.

Q. What is NRE fixed deposit?

A. The full form of NRE Fixed Deposit is Non-Resident External Fixed Deposit. This Fixed Deposit is for Non-Resident Indians (NRIs). They can deposit their foreign earnings in an Indian Account. Interest earned on an NRE FD is not taxable in India. The account is maintained in INR which means that the money deposited is converted as per the later forex rates.

Q. What is the difference between NRE FD and NRO FD?

A. NRE Fixed Deposit (Non-Resident External) is for NRIs to remit/transfer their foreign earnings to an Indian account. NRO Fixed Deposit (Non-Resident Ordinary) is for NRIs to manage their income earned in India.

Q. Can depositors get interests on a monthly basis?

A. Yes, non-cumulative fixed deposits have this option. You can choose to have interest in your account on a monthly basis.

Q. What benefits are offered to senior citizens under FD schemes?

A. Senior citizens get an additional interest (usually up to 0.50%, approximately) on the same FD scheme. Banks like SBI, ICICI Bank and HDFC Bank are offering extra interest of up to 0.30% on the existing preferential rates to the senior citizens.

Q. Does premature withdrawal negatively affect Fixed Deposit earnings?

A. Yes. You have to pay a penalty of up to 1% on premature closure. This 1% of penalty is levied on the effective rate of interest which reduces your earnings.

Q. Can minors open a fixed deposit account?

A. Many banks and NBFCs offer Fixed Deposit investment options to minors with a parent/guardian acting as co-applicant. Post Office Fixed Deposit or post office time deposits can be opened in the name of a minor (above the age of 10 years) and be operated by a legal guardian till the minor attains 18 years of age.