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Top Bank Fixed Deposits to invest in 2023

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At a moment when the stock market is touching new heights, interest rates are at their peak, and people are talking of recession in the Western economy, an investor that generates income while saving their capital wins the race. In this scenario, people usually look for safer investing horizons, including bank FDs, government bonds, etc. Although bank FDs are not as secure as government bonds, they are safer as compared to other investment vehicles, and they yield a higher return than government bonds.

Before moving forward, let's first know what fixed deposits are?

A fixed deposit (FD) is a financial instrument offered by banks or NBFCs, providing investors with a higher interest rate than a regular savings account until a specified maturity date. They are suitable for conservative investors seeking fixed returns and corporations and businesses investing in FDs for their short-term or long-term fund requirements.

There are several reasons why people invest in fixed deposits:

  1. Safety of principal: Fixed deposits are safe investment options as the bank guarantees the principal amount. There is no risk of losing the principal amount. This makes fixed deposits attractive for risk-averse investors.
  2. Fixed returns: Fixed deposits offer fixed interest rates for the tenure of the deposit. The returns are known upfront at the time of investment. This provides stability and predictability of returns to the investors.
  3. Liquidity: Most fixed deposits allow premature withdrawals, though some penalties may be levied. So investors have the flexibility to withdraw money in case of an emergency.
  4. Tax benefits: In some countries, the interest earned on fixed deposits is tax-exempt up to a certain limit. This provides tax benefits to the investors.
  5. Higher interest rates: Fixed deposits generally offer higher interest rates than regular savings accounts. So investors can earn higher returns on their surplus funds by investing in fixed deposits.
  6. Flexible tenures: Fixed deposits are available for various tenures ranging from 7 days to 10 years. Investors can choose tenures.
  7. Insured: FDs are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) and can be used as loan collateral.

After the investor has made up his or her mind to invest in FD, there are components that need to be assessed before investing in FD. Before investing in a fixed deposit, assess interest rates, tenure, FD type, minimum and maximum deposit amounts, premature withdrawal penalties, etc. Choose a bank with the highest interest rate for your desired tenure, considering factors like duration, compounding interest, minimum and maximum deposit amounts, and penalty charges. Choose a tenure that aligns with your financial goals and an FD type that offers higher returns.

There are some small finance banks (SFB) that offer interest rates on FDs that are more than 9%, and on the other hand, there are public sector banks that are giving 6-7% interest. Small finance banks offer high rates because their exposure is limited to a specific geographical area, which are both an opportunity and a problem. Opportunity as in, the local residents are closely associated of the bank business and make them banking partner, problem as in, they can't open branches in other cities in search of more deposits.

Here's a look at the banks currently offering FD interest rates.

General Fixed Deposit Rates

Name Type of bank 1 year 3 year 5 year
SBI PSU 6.8 6.5 6.5
PNB bank PSU 6.75 7 6.5
Indian overseas bank PSU 6.5 6.5 6.5
IDFC first bank Private bank 6.75 7.75 7
RBL bank Private bank 7 7.1 7.1
IndusInd bank Private bank 7.75 7.5 7.25
SBM bank Private bank 7.05 7.65 7.65
DCB bank Private bank 7.25 8 7.75
Fincare small finance bank Small finance bank 7.5 8 8..00
Unity small finance bank Small finance bank 7.35 7.65 8.25
Suryoday Small finance bank Small finance bank 6.85 7.25 9.1

 

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