Synopsis: This article subcategorizes the top 5 banks for both public and private sector and compares the interest rates. Find out which will give you higher profits and select the appropriate FD strategy to achieve your objectives.
Fixed Deposits (FDs) remain among the most popular investment choices in India, particularly among those investors who require a low-risk investment with high returns. However, when deciding on where to make the investments, there is always a dilemma: a private bank or a state owned (PSU) bank? Although the PSU banks are traditionally considered to be very safe and supported by the government, the private banks tend to attract investors with a slightly higher interest rate and improved service options. Indeed, recent trends indicate that the FD returns in the private banks may be slightly higher than in the PSU banks, but the difference is typically not very significant.
What are Fixed Deposits (FDs) and FD Interest Rates?
The simplest type of investments is a Fixed Deposit (FD) which involves depositing a large amount of money with a bank over a certain time (1, 3 or 5 years) and receiving interest on such a deposit. The interest rate when you invest is fixed, unlike savings accounts, which means your returns will not be affected even in case market rates move. The percentage returns that banks give on such deposits are the FD interest rates. They vary based on,Tenure (the longer the better), Type of bank (private vs PSU), Customer type (senior citizens typically receive a special interest rate, approximately +0.25 to +0.75)
Private Sector Banks
HDFC Bank, ICICI Bank and Axis Bank are some of the private sector banks owned by the private shareholders. They are concerned about profitability and growth and thus, they tend to be more competitive in providing better FD rates and digital services. They usually have FD interest rates between 6.25-7.50% (according to tenure). The older population tends to receive an extra +0.50% to +0.75% percentage, which increases returns a bit.
Public Sector Banks
Public sector (PSU) banks are majority-owned by the government, such as State Bank of India, Punjab National Bank and Bank of Baroda. They are reputed to be very safe, stable, and trusted, yet are more conservative. Their FD rates tend to be lower at about 6.00-6.75 and are more reliable. The elderly also receive an additional interest of +0.50% which is guaranteed and stable.
Also Read: Over 8% Interest on RBI Floating Rate Savings Bonds – Should You Choose Them Over FDs?
FD Rates of Top Private Sector Banks
| Bank | Highest FD rate | 1 Year | 3 Years | 5 Years |
| Bandhan Bank | 7.25% | 7.00% | 7.25% | 5.85% |
| IDFC FIRST BANK | 7.40% | 6.50% | 7.00% | 7.00% |
| RBL Bank | 7.20% | 7.00% | 7.20% | 6.70% |
| DCB Bank | 7.15% | 6.90% | 7.00% | 7.15% |
| YES Bank | 7.00% | 6.65% | 7.00% | 6.75% |
FD rates of Top Public Sector Banks
| Bank | Highest FD rate | 1 Year | 3 Years | 5 Years |
| Central bank of India | 6.50% | 6.20% | 6.00% | 6.00% |
| Bank of India | 6.60% | 6.25% | 6.25% | 6% |
| Punjab & Sind Bank | 6.75% | 5.85% | 5.85% | 5.95% |
| Canara Bank | 6.60% | 6.25% | 6.25% | 6.25% |
| Union Bank of India | 6.60% | 6.30% | 6.25% | 6.00% |
The FD rates with private banks are marginally higher than the PSU banks, but just slightly higher. Statistics show that the rates offered by the private banks are generally more competitive with most ranges reaching around the 6.5-7% range and above (with common tenure) and PSU banks are usually pegged slightly below these thresholds. PSU banks, on the other hand, tend to stay conservative and consistent, with most rates clustering around 6.0%–6.5%.
Conclusion
Although there is a possible slight advantage in the interest rates of FDs in the private banks, there is a small difference between it and the PSU banks. The decision is now based on what matters the most to you either returns or safety. Those who require higher yield would want to use the private banks, though others who want stability, trust and stability would prefer to use the PSU banks. Finally, both are good when it comes to low risk investment and it is worthwhile to select one depending on your financial objectives but not necessarily the rate.
Written by Boyapati Sai Jasmitha
