Top 10 banks offering favourable interest rate on deposits
Top 10 banks presently are offering interest rates up to 6.5 per cent (for senior citizens). Read on to find out more.
Historically, it has been seen that bank fixed deposits (FD) and public provident fund (PPF) are the two preferred avenues that a person thinks when he starts earning. In fact, the older generation ideally suggests the new one to consider bank FDs and PPF. However, with investors getting matured, mutual funds also have gained traction. Retail investors are preferring mutual funds for getting exposure to equity markets. This can also be attributed to ease and options that it offers such as investing in instalments known as Systematic Investment Plan (SIP). Though, these days this feature is not just limited to mutual funds.
At present, banks have increased their deposit rates that were at historical lows and top 10 banks are now offering up to 6.5 per cent per annum (select banks) to senior citizens and up to 5.75 per cent to non-senior citizens having deposits below Rs 2 crore.
|
Historical Deposit Rates
|
|
Year
|
Savings Rate
|
1-Year
|
3-Year
|
5-Year
|
Above 5 Years
|
|
2004-05
|
3.50
|
5.25
|
5.75
|
6.25
|
6.25
|
|
2005-06
|
3.50
|
6.00
|
6.75
|
7.00
|
7.00
|
|
2006-07
|
3.50
|
6.75
|
8.50
|
9.50
|
8.50
|
|
2007-08
|
3.50
|
8.00
|
8.75
|
8.75
|
9.00
|
|
2008-09
|
3.50
|
8.00
|
8.75
|
8.50
|
8.50
|
|
2009-10
|
3.50
|
6.00
|
7.00
|
7.50
|
7.75
|
|
2010-11
|
3.50
|
8.25
|
9.00
|
8.75
|
8.75
|
|
2011-12
|
4.00
|
9.00
|
9.25
|
9.25
|
9.25
|
|
2012-13
|
4.00
|
8.75
|
9.00
|
9.00
|
9.00
|
|
2013-14
|
4.00
|
8.75
|
9.25
|
9.10
|
9.10
|
|
2014-15
|
4.00
|
8.50
|
8.75
|
8.75
|
8.50
|
|
2015-16
|
4.00
|
7.25
|
7.50
|
7.50
|
7.30
|
|
2016-17
|
4.00
|
6.75
|
7.00
|
6.90
|
6.75
|
|
2017-18
|
4.00
|
6.40
|
6.75
|
6.70
|
6.75
|
|
2018-19
|
4.00
|
6.25
|
7.25
|
7.25
|
7.25
|
|
2019-20
|
3.50
|
5.00
|
6.20
|
6.40
|
6.40
|
|
2020-21
|
3.00
|
4.90
|
5.30
|
5.35
|
5.50
|
|
2021-22*
|
3.00
|
4.90
|
5.15
|
5.35
|
5.50
|
|
* Up to September 3, 2021
Source: RBI
|
Above are the table that shows the historical trend of deposit rates. As you can see, the interest rates began to inch down since 2012-13. Looking back 10 years from now, in the year 2011-12 the deposit rates offered were 9 to 9.25 per cent. With this kind of return, investors were able to beat inflation. In fact, they were able to generate a positive real rate of return.
Let’s say you had invested Rs 100 in the year 2011 at the rate of 9 per cent for the next five years. At the end of the fifth year, you could have accumulated Rs 154. But if we look at inflation from 2012 to 2016, then by the year 2016 Rs 100 would be worth 142.
This means when you had invested, you were able to buy things at Rs 100 but to buy the same things five years later, you need to spend Rs 142 from the pocket. With this, the effective annual inflation rate works out to be 7.28 per cent and thereby the real rate of return works out to be 1.72 per cent. This shows that out of Rs 154, Rs 45 is the wealth that you have created.
|
Name of Bank
|
For General Citizens (p.a.)
|
For Senior Citizens (p.a)
|
|
State Bank of India FD
|
2.90% to 5.40%
|
3.40% to 6.20%
|
|
ICICI Bank FD
|
2.50% to 5.50%
|
3.00% to 6.30%
|
|
HDFC Bank FD
|
2.50% to 5.50%
|
3.00% to 6.25%
|
|
Punjab National Bank FD
|
2.90% to 5.25%
|
3.50% to 5.75%
|
|
Canara Bank FD
|
2.90% to 5.25%
|
2.90% to 5.75%
|
|
Axis Bank FD
|
2.50% to 5.75%
|
2.50% to 6.50%
|
|
Bank of Baroda FD
|
2.80% to 5.25%
|
3.30% to 6.25%
|
|
IDFC Bank FD
|
2.50% to 5.25%
|
3.00% to 5.75%
|
|
Bank of India FD
|
2.85% to 5.05%
|
3.35% to 5.55%
|
|
Punjab and Sind Bank FD
|
3.00% to 5.30%
|
3.50% to 5.80%
|
|
Source: Bankbazaar.com
|
The above table presents the deposit rates being offered by the top 10 banks for deposits below Rs 2 crore. Let’s assume that you are investing in bank FDs for the next five years, where the inflation would be 5.79 per cent (past 10 years median). Here we would consider the bank FD with the highest rate in the above table that is on offer. In the case of senior citizens, it is 6.5 per cent and for general citizens, it is 5.75 per cent.
In this instance, the real rate of return works out to be 0.72 per cent for senior citizens and negative 0.03 per cent for general citizens. So, the rates that are being offered presently are just covering the inflation but is not creating any wealth for you.
Therefore, bank FDs makes sense if you are looking out for saving money for your short-term needs. But for wealth creation, mutual funds are the better option. From the financial planning perspective, you can consider bank FDs for your emergency planning and mutual funds for your other financial goals.