There has been a noticeable increase in the number of people choosing fixed deposits in banks. This rise in deposits can be attributed to the Reserve Bank’s decision to raise the repo rates, which led to banks increasing their lending rates. Consequently, the interest rates on fixed deposits also increased.
For example, if we consider the interest rates on two-year tenure deposits, we can see that the Reserve Bank of India (RBI) increased the repo rates from 4% to 6.50% in the past eighteen months. As a result, banks passed on the burden to customers by increasing loan interest rates.
To provide some relief, many banks have increased the interest rates on fixed deposits. As a result, a lot of people are now opting for fixed deposits since they offer attractive returns and a sense of security. This has made fixed deposits a popular investment option for individuals looking to save money.
Banks offer different interest rates for deposits with varying tenures, which can range from 7 days to a maximum of ten years. Generally, private banks offer slightly higher interest rates than government banks. On the other hand, small finance banks usually offer the highest interest rates. Now, let’s take a closer look at the interest rates for fixed deposits (FDs) with a two-year tenure in each bank.
The Bank of India, a public sector bank, is currently offering a 7.25% interest rate on 2-year term deposits, which is higher than the interest rates offered by other leading banks. In comparison, two private banks, Axis Bank and ICICI Bank, are offering a lower interest rate of 7.10% on 2-year fixed deposits. Therefore, it can be concluded that at present, private banks are offering a lower interest rate than public sector banks on term deposits.
Two of India’s largest banks are currently offering fixed deposit (FD) options with attractive interest rates. HDFC Bank, the largest private bank, and State Bank of India (SBI), the largest public sector bank, are both offering a 7% interest rate on their 2-year FDs. Meanwhile, Canara Bank and Bank of Baroda are offering a 6.85% interest rate on their 2-year term deposits.
Punjab National Bank, Indian Bank, and Union Bank of India are offering a two-year fixed deposit with varying interest rates of 6.80%, 6.50%, and 6.50%, respectively. It is essential to research the financial stability of a bank before depositing your money.
This is because if the bank becomes bankrupt, you may end up losing a significant portion of your funds. However, the Deposit Insurance and Credit Guarantee Corporation (DICGC) will only reimburse fixed deposits up to Rs. 5 lakhs in the event of a bank’s insolvency.