The news of repo rate hikes by the Reserve Bank of India (RBI) has served as good news to many, especially, investors awaiting higher interest rates on bank deposits. Conservative investors are on for a roll as many banks and non-banking financial companies (NBFCs) are constantly announcing hikes in deposit rates. Many investors are gradually moving their investments to fixed deposits (FDs) via FD laddering to keep small amounts in FDs for short tenures.
Ironically, small finance banks are offering higher interest rates than their bigger counterparts. This is evident from the interest rates offered on myriad deposits for different investment horizons.
Fixed deposit interest rates of top 10 banks in India for below ₹2 crores
|Name of the bank||Interest rates for general citizens (in %)||Interest rates for senior citizens (in %)|
|IDFC First Bank||3.50-7.50||4.00-8.00|
|Punjab National Bank||3.50-7.25||4.00-7.75|
|Kotak Mahindra Bank||2.75-7.10||3.25-7.60|
|Indian Overseas Bank||4.50-7.00||5.00-7.50|
|Source: Bank Bazaar (https://www.bankbazaar.com/fixed-deposit-rate.html#highest_small_f_6)|
Compared to most other investment options, FDs are relatively safe, thus, explaining the high propensity among investors to park their money in them. This has helped many small bank depositors and investors to earn high returns. Those depositing in banks enjoying brand power also benefit from the high returns offered on their deposits.