Despite some rate adjustments, small finance
banks are leading the charge with attractive
fixed deposit rates, providing a safe haven for
conservative investors.
In August, savers looking for a secure investment can find fixed deposit rates as high as 8.50%. While some larger public sector banks like Canara Bank have slightly trimmed their rates, a number of private and small finance banks are offering highly competitive returns. This comes as the Reserve Bank of India (RBI) holds its key policy rate steady, creating a stable environment for fixed-income investors.
Why FDs Remain a Popular Choice
Even with some banks adjusting their rates downward, fixed deposits continue to be a go-to option for those who are wary of stock market volatility. This stability is a key selling point in uncertain economic times.
"Even with interest rates softening, fixed deposits remain a dependable choice for conservative savers," said Adhil Shetty, CEO of BankBazaar.com. "Their biggest strength lies in capital safety, predictable returns, and quick liquidity, regardless of market performance.” He added that in the face of global uncertainty, “FDs offer the kind of stability many seek in turbulent times.”
This sentiment is reflected in the market, where the RBI's decision to leave the repo rate unchanged at 5.5% has provided a sense of predictability for both lenders and depositors.
A Look at the Highest FD Rates in August
Small finance banks are currently offering the most attractive rates, often surpassing those from larger public and private sector banks. Here’s a comparison of some of the top rates available, based on data from PaisaBazaar as of August 13.
| Bank Type | Bank Name | Highest Rate Offered | Tenure for Highest Rate |
|---|---|---|---|
| Small Finance Bank | slice Small Finance Bank | 8.50% | 18 months 1 day to 18 months 2 days |
| Small Finance Bank | Suryoday Small Finance Bank | 8.20% | 5 years |
| Private Sector Bank | SBM Bank India | 7.50% | 5 years |
| Private Sector Bank | DCB Bank | 7.40% | 27 months to less than 28 months |
| Public Sector Bank | Central Bank of India | 7.00% | 2222 days or 3333 days |
| Public Sector Bank | Punjab & Sind Bank | 6.80% | 444 days |
Don't Forget About Tax
It is important to remember that the interest earned on your fixed deposits is taxable. If your annual interest income crosses a certain threshold, the bank will deduct tax at source (TDS). The current limit is ₹50,000 for general citizens and ₹1 lakh for senior citizens.
"If her total income is below ₹2.5 lakh, she owes no additional tax," Shetty explained, giving an example. "To avoid TDS, she can submit Form 15G at the start of the financial year, declaring that her income is below the taxable limit.”
The current stability in FD rates follows a period where the central bank made significant cuts to its repo rate, prompting many banks to lower their deposit offerings. For now, the market has found a balance. For savers, this means that while FDs remain a safe and reliable choice, it is more important than ever to compare rates across different types of banks to find the best possible return for your money.
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