FD Interest rates 2023

Introduction

Fixed deposits (FDs) have been a popular investment choice due to their attractive features, including income certainty and capital protection. This investment instrument provides a stable source of income and safeguards the principal amount invested, making it an ideal choice for short-term financial goals, parking emergency funds, or building a post-retirement corpus.

FD interest rates offered by scheduled banks typically range from 2.10% p.a. to around 7.50% p.a. for regular depositors, with tenures varying from 7 days to 10 years. Learn more about the different FD interest rates in 2023.

FD Interest Rates of Top 10 Banks

The FD rates for the top 10 Indian banks are:

Fixed Deposit Interest Rates by Other Popular Banks in India

The fixed deposit rates of other popular Indian banks are:

How Do Fixed Deposits Work?

FDs are a popular investment option for lending money to a bank or non-banking financial company (NBFC). The financial institution guarantees to return the invested sum at the end of the tenure, known as the maturity period, and pay you interest. The bank then lends this money to other borrowers on interest. As an investor, you receive a portion of this interest in return.

The fixed deposit interest rate depends on its tenure or maturity period. A shorter-term FD, such as a 7-day deposit, carries a lower interest rate than a longer-term one, like a one-year FD. This is to compensate for the time risk of money, where a rupee today is more valuable than the same rupee a year from now due to inflation.

Inflation pushes up prices over time, making the rupee worth less in the future than it is today. Therefore, an investor needs to be compensated for the time value of money by receiving a higher interest rate on longer-term FDs.

Types of Fixed Deposits

Several FDs are available in India, each with unique features and benefits.

1.    Standard FD: A standard FD is India's most common type. It is a traditional form of investment where you deposit a lump sum amount for a fixed period at a fixed interest rate. The tenure of an FD can range from 7 days to 10 years, with FD interest rates varying based on the tenure and the bank offering the FD.

2.    Tax-Saving FD: Tax-saving FDs are secure when the investment is eligible for tax deductions under Section 80C of the Income Tax Act. These FDs have a lock-in period of 5 years. They offer a higher interest rate than regular FDs. 

3.    Senior Citizen FD: Senior citizens are offered a higher interest rate on FDs than regular ones. Banks usually offer an additional fixed deposit interest rate of 0.50%–0.75% p.a. above the applicable FD card rates to senior citizens.

4.    Flexi-FD: Flexi-FDs offer flexibility by allowing investors to withdraw a portion of their FD without breaking the entire deposit. The withdrawn amount earns a lower interest rate than the full FD amount. 

5.    Recurring Deposit: A recurring deposit is a form of FD that allows you to invest a fixed amount monthly or quarterly for a specific duration. The fixed deposit interest rate is pre-determined and fixed. You will receive your principal and the interest amount calculated proportionally once the maturity period ends.

Benefits of Fixed Deposits

Here are some benefits of FD:

1.    Guaranteed Returns: FDs offer guaranteed returns predetermined at the time of investment. This means that you know exactly how much you will earn on your investment, and the rate of return is not subject to market fluctuations.
2.    Low Risk: FDs are considered low-risk investments immune to market volatility. You receive the promised returns if you hold your fixed deposit until maturity.
3.    Liquidity: FDs offer varying degrees of liquidity, depending on the deposit terms. Some allow for early withdrawal, although this may incur a penalty fee. Others may restrict premature withdrawal.
4.    Flexibility: FDs offer a range of tenures, from one month to ten years, helping you choose a tenure that suits your investment goals.
5.    No Charges: FDs do not come with charges or fees, making them cost-effective.
6.    Easy to Open: FDs are easy to open and require minimal documentation, making them accessible to a wide range of investors.

How to Open a Fixed Deposit Account?

You can open an FD via online or offline modes.

Online: It is easiest to start an FD at a bank with which you already have an account. You can use net banking facilities to fill up the online form for opening an FD and submit it. KYC will not be required as your bank already has your details. You can transfer the funds from your account for the desired FD tenure.

Offline: To open an FD account offline, visit your bank's nearest branch and fill out an application form. Submit the form along with the required documents. Deposit the required amount, and you will receive your FD receipt

Withdrawal and Renewal of Fixed Deposits

FDs are a popular investment options because they offer stable returns and are considered low risk. However, once you have invested your money in an FD, you may need to withdraw the funds before the maturity date or renew the FD once it has matured.

Withdrawal of Fixed Deposits

FDs are known for their stable returns, making them an attractive option for investors. However, unforeseen circumstances may arise, and you may need to withdraw the funds before the maturity date, which might cost you a penalty. This fee varies between banks and is usually a percentage of the interest earned on the deposit.

Renewal of Fixed Deposits

Once your FD has matured, you can renew it for another term. The renewal process is straightforward, and you can renew your FD at the prevailing interest rate for the chosen tenure. Some banks offer the option to renew the FD automatically, while others require you to fill out a renewal form.

It is essential to note that FD interest rates are subject to change, and the rate at the time of renewal may differ from when you first opened the FD. Therefore, monitoring the FD interest rates and renewing your FD when the rates are favourable is advisable.

Why Invest in FDs?

Here are some reasons you should consider investing in FDs:

1.    Guaranteed returns: FDs offer a guaranteed rate of return, which means you know exactly how much you will earn on your investment. The interest rate is fixed at the time of investment, and you will earn that rate throughout the investment period.
2.    Low-risk investment: FDs are considered low-risk because the returns are guaranteed, and your principal amount is safe. FDs have no market risk, unlike other investment options like stocks or mutual funds.
3.    Flexibility: FDs offer various tenure options, ranging from a few months to several years. You can choose a tenure that suits your investment goals and needs. 
4.    Easy to open and manage: FDs are easy to open and manage. You can open an FD account online or at a bank branch. You can also manage your FD account online and track your investments.
5.    Tax benefits: FDs offer tax benefits under Section 80C of the Income Tax Act, 1961. However, the interest earned on FDs is taxable per your income tax slab.

Things to Consider Before Investing in Fixed Deposits

Factors you should consider before investing in FDs:

1.    Interest rates: The interest rate offered on FDs varies across banks and depends on the tenure of the deposit. Before investing in an FD, compare the interest rates offered and choose the best one.
2.    Tenure: FDs offer various tenure options, ranging from a few months to several years. Consider your investment goals and needs before choosing one. 
3.    Penalty for premature withdrawal: FDs are known for their fixed tenure, and if you withdraw the funds before maturity, you may have to pay a penalty fee. Before investing in an FD, check the penalty charges for premature withdrawal, as it can significantly impact your returns.
4.    Tax implications: The interest earned on FDs is taxable as per your income tax slab. Additionally, if you invest in a tax-saving FD, the investment amount is eligible for a tax deduction under Section 80C of the Income Tax Act. Consider the tax implications before investing in an FD.
5.    Inflation: FDs offer fixed returns, which means the returns do not adjust for inflation. Consider the inflation rate before investing in an FD, as inflation can erode the real value of your investment.

Conclusion

FDs offer safe investment options with guaranteed interest rates, special rates for senior citizens, various payment options, no market risks, and tax deductions. However, you must compare rates among leading banks before opening or renewing an FD. See the FD interest rates 2023 given above.

Frequently Asked Questions

Q1. Are FDs a good investment?

Ans. FDs can be a good investment for those seeking a safe and stable return on their investment without the risk associated with the stock market.

Q2. What is the minimum period for a fixed deposit?

Ans. The minimum period for a fixed deposit varies among banks but is generally around 7 days, while some banks may have a minimum period of 14 or 30 days.

Q3. What is the minimum amount that can be deposited in an FD account?

Ans. Most banks require a minimum deposit of Rs. 1,000.

Q4. Can I get monthly interest on a fixed deposit?

Ans. Yes, some banks offer the option of receiving monthly interest on FDs. However, the interest rate offered on monthly payout FDs may be lower than that offered on cumulative FDs, where the interest is paid out at the end of the term.

Q5. Can I prematurely withdraw from a Tax Saver Term Deposit?

Ans. No, premature withdrawal is not allowed in Tax Saver Term Deposits. These FDs come with a lock-in period of five years, and the funds cannot be withdrawn before the maturity date.