How to Choose the Best Fixed Deposit Scheme from Public Sector Banks in India

Fixed deposits (FDs) are one of India’s most popular and safe investment options. They offer guaranteed returns, capital protection, and tax benefits. However, not all FD schemes are created equal. Different banks offer different interest rates, tenures, and features for their FD products. So how do you choose the best FD scheme for your needs?

In this blog post, we will compare the Fixed Deposit interest rates of all public sector banks in India as of May 2023 and help you find the best FD scheme for your financial goals.

What are Public Sector Banks?

Public sector banks (PSBs) are owned or controlled by the government of India. There are 12 PSBs in India as of 2023, after the merger of several smaller banks in 2020. These are:

– State Bank of India (SBI)
– Punjab National Bank (PNB)
– Canara Bank (CB)
– Bank of Baroda (BoB)
– Union Bank of India (UBI)
– Indian Bank (IB)
– Bank of India (BoI)
– Indian Overseas Bank (IOB)
– Central Bank of India (CBI)
– UCO Bank (UCO)
– Bank of Maharashtra (BoM)
– Punjab and Sind Bank (PSB)

PSBs are known for their wide network of branches, customer service, and social responsibility. They also offer various banking products and services, including FDs.

What are Fixed Deposits?

Fixed deposits (FDs) are investment schemes where you deposit a lump sum amount in a bank for a fixed period and earn a fixed rate of interest on it. The interest rate is usually higher than the savings account rate and depends on the tenure, amount, and bank. You can choose a tenure from 7 days to 10 years, depending on your liquidity and financial goals.

FDs are ideal for conservative investors who want to earn steady returns without taking any risks. They are also suitable for short-term goals like saving for a vacation, wedding, or car. FDs also offer tax benefits under Section 80C of the Income Tax Act, 1961, if the tenure is 5 years or more.

How to Compare FD Interest Rates of Public Sector Banks?

The FD interest rates of public sector banks vary from 2.75% to 7.35% p.a. for regular customers and from 3.25% to 7.85% p.a. for senior citizens, as of May 2023. The interest rates are subject to change as per the bank’s discretion and market conditions.

To compare the FD interest rates of public sector banks, We can divide them into 4 categories namely Short Term, Medium Term, Long Term & Special Terms.

Short Term FD Rates

The table below shows the comparison of Fixed Deposits Interest Rates of the above 12 Banks from 7 Days to 180 Days

As you can see, the FD interest rates of public sector banks are not very different from each other, except for Canara Bank, which offers higher rates for most tenures and Indian Bank offers the lowest.

Medium Term FD Rates

The table below shows the comparison of Fixed Deposits Interest Rates of the above 12 Banks from 181 Days to 365 Days.

Here also As you can see, the FD interest rates are not very different from each other, except for Canara Bank, which offers higher rates for most tenures and Indian Bank offers the lowest.

Long Term FD Rates

The table below shows the comparison of Fixed Deposits Interest Rates of the above 12 Banks from above 1 year to 10 years.

Here also As you can see, the FD interest rates are not very different from each other, except for Canara Bank, which offers higher rates for most tenures and Bank of Maharastra offers the lowest.

Special Terms FDs

The table below shows the comparison of Fixed Deposits Interest Rates of the above 12 Banks for Specific Special Days

Here as you can see except for Bank of India, all other banks are giving Special Days FDs whereas Bank of Baroda is giving 7.25% for 399 days which is best than all other Banks.

The above table shows the interest rates for deposits below Rs 2 crore for different tenures. Senior citizens are usually offered an additional interest of 0.50% p.a. than the above rates.

How to Choose the Best FD Scheme from Public Sector Banks?

To choose the best FD scheme from public sector banks, you need to consider the following factors:

Your investment objective:  You should choose the FD tenure that matches your financial goal. For example, if you want to save for a short-term goal, you can opt for a 1-year or 2-year FD. If you want to save for a long-term goal, you can opt for a 5-year or 10-year FD.

Your liquidity requirement: You should choose the FD tenure that suits your liquidity requirement. For example, if you need regular income, you can opt for a monthly or quarterly interest payout option. If you don’t need regular income, you can opt for a cumulative option, where the interest is compounded and paid at maturity.

Your tax liability: You should choose the FD tenure that minimizes your tax liability. For example, if you fall in the higher tax bracket, you can opt for a 5-year tax-saving FD, which offers tax deductions under Section 80C. However, you should note that the interest earned on FDs is taxable as per your income tax slab rate and is subject to TDS if it exceeds Rs 40,000 (Rs 50,000 for senior citizens) in a financial year.

Your risk appetite: You should choose the FD scheme that matches your risk appetite. For example, if you are a risk-averse investor, you can opt for a PSB FD, which is safe and secure. However, if you are willing to take some risk for higher returns, you can opt for a private sector bank or a small finance bank FD, which offers higher interest rates but may have lower credit ratings.

Conclusion

Fixed deposits are a good investment option for investors who want to earn guaranteed returns without taking any risks. However, not all FD schemes are the same. Different banks offer different interest rates, tenures, and features for their FD products. Therefore, you should compare the FD interest rates of all public sector banks in India from the above tables and choose the best FD scheme that suits your needs and goals.