If you are looking for higher interest rates from bank deposits, popularly referred to as FDs, stop looking at top banks. Yes, big banks are stingy. They might do sweet-talk, emphasize on your bank-customer relationship and wax eloquent about their world-class services, but they are not paying higher interest rates. Period.
Compared to the powerful big banks which are household names, the new and smaller banks are offering you more bang for your buck (up to 9%). The new set of banks may be small, but they are regulated by the RBI. If your only goal is to earn the highest interest rates from FDs, small is beautiful. Here’s why.
Big banks small on rates
Just a few days ago, you must have read headlines about the country’s largest and most trusted lender, State Bank of India (SBI), hiking deposit rates. In truth, SBI increased interest rates by 0.05-0.10% across some tenures. Even after hiking these deposit rates, SBI now pays a maximum of 6.85% per annum interest rate for retail domestic term deposits. This is if you keep the money with SBI for the tenure of ‘5 years and up to 10 years’. By the way, the lowest interest rate that SBI pays is 5.75%, which is a pittance.
You may say bigger private sector banks pay better, but do they really pay a lot more? Evidence does not seem to suggest so. The maximum FD interest rate that you can get from ICICI Bank is 7%. That’s it? Yes, 7% is all you can get by keeping your bank FD (with premature withdrawal facility). You may be pinning hopes on HDFC Bank to be the leader it is, but sorry, the private sector banking giant is not lion-hearted in terms of offering the best interest rates. The maximum interest rate that a bank FD fetches in case of HDFC Bank is 7.25%. You get that interest rate if you keep the FD money for any tenure starting from 1 year to 2 years.
Small is beautiful
Now, let us turn your attention to the newer and smaller banks. They are not flush with deposits, unlike their bigger peers, and that is perhaps why these new banks are offering the best interest rates for keeping your hard-earned money with them.
AU Small Finance Bank is offering you 7.55% for keeping money with them for a tenure of ’12 Months 1 Day to 18 Months’ (Equitas Bank offers 8% for 12-18 months). If you keep the money for ’45 months 1 day to 60 months’, AU Small Finance Bank pays you 8%. FD interest rate for ‘1 Year to 2 Years’ tenure is also 8.00% p.a. at Ujjivan Small Finance Bank.
If you can keep the FD money for ‘735 days’, get 8.25% p.a. at Ujjivan. In case of Utkarsh Small Finance Bank, the new bank is paying you 8.25% per annum for keeping a bank FD for ‘1 year to 455 days’. Keep it for ‘456 days to 2 years’, Utkarsh rewards you with a higher 8.5% interest rate.
ESAF Small Finance Bank is paying you a higher 8.75% p.a. for a bank FD tenure of ‘365 – 727 days’. One of the highest FD interest rates is offered by Fincare Small Finance Bank, which is paying 9% to the general public. Yes, Fincare is paying this very attractive interest rate for ’24 months 1 day to 36 months’ tenure.
Unless you are happy with measly 6-7% interest rates at the goliaths, it may be worthwhile to consider David aka new banks that are offering 7.5-9% interest rates.