Fixed Deposit is an investment product in which the depositor invest the desirable amount in the bank for a fixed period of time. The bank pays the interest on the deposited amount remaining with the bank for a certain time period. This is an effective way to earn attractive returns on the money not in use.
It is an optimum way of utilizing the idle funds and saving for the future needs. Also, investment in the fixed deposit is safe as little or no risk is associated with this type of investment. The depositor receives a fixed interest as promised to him at the time of opening a fixed deposit account. The interest yield is calculated at the FD interest rates prevailing at the time of booking the deposit.
What is FD Interest Rate-
The interest rate is the percentage at which the returns on the fixed deposits are calculated. The percentile on deposited amount is added to the initial amount and is paid at the time of maturity of the deposit. These rates are predetermined by the bank and vary according to the tenure of the investment. The rates also differ from institution to institution. Therefore, before opening an FD account the depositor must check and compare the rates of various banks. The rate of interest offered on fixed deposits by various banks are given below:
FD Interest Rates-
State Bank of India (SBI): The rate of interest offered by SBI on the term deposit of 7 days to 45 days to the regular citizen is 3.75% p.a. and to senior citizens is 4.25% p.a. It pays an interest of 4.25% and 4.75% to regular and senior citizen respectively on the deposits remaining with the bank for the period of 5 years to 10 years.
Indian Post Office: The candidates can book the deposit for the period of 1 year, 2 years, 3 years and 5 years at Indian Post Office. The interest rate on these deposits variates from 7.00% p.a. to 7.80% p.a. and the deposit account can be opened with the minimal amount of ₹ 200 and its multiples thereafter.
HDFC Bank: The HDFC Bank provides fixed deposits for the period ranging from 7 days to 10 years. The rate of interest on the deposits made for the period of 7 days to 14 days is 3.50% p.a. and for the period of 2 years to 10 years is 6.00% p.a. The highest interest offered by the bank is 6.90% p.a. at the term period of 1 year 1 day to 3 years. Also, the bank provides additional interest of 0.50% to the senior citizens.
Axis Bank: The Axis Bank offers the interest rate of 3.50% p.a. to 7.00% p.a. on the deposits remaining with the bank for the period of 7 days to 10 years. It offers an extra interest to senior citizens on certain tenure.
ICICI Bank: At ICICI Bank, the customers can book the deposit for the tenure of 7 days to 10 years with premature withdrawal facility and without premature withdrawal facility. The interest rate on both the types is different. The interest rate on fixed deposit with premature withdrawal facility made for the period of 7 days to 14 days is 4.00% p.a. The rate prevailing on the term of 5 years 1 day to 10 years is 6.50% p.a. However, the interest of 5.25% p.a. - 6.30% p.a. is paid on the deposits without premature withdrawal made for the period ranging from 7 days to 10 years. The senior citizens are entitled to receive an extra interest of 0.50% on the deposits booked with the amount less than ₹ 1 crore.
What are the factors that help in determining the fixed deposit rates-
The market forces play a vital role in deciding the rate of interest. Various economic factors contribute in the determination of return rates and they are as follows:
Factors Affecting FD Interest Rates :
- Policies incorporated by Reserve Bank of India
- Recession
- Inflation
- Current State of Economy
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