After keeping the benchmark interest rate unchanged for ten consecutive meets, Reserve Bank of India (RBI) is expected to cut the repo rate in the next monetary policy committee (MPC) meet scheduled in December. It is, therefore, recommended to lock your savings in fixed deposits (FDs) for as long as possible, argue experts.
"If your financial goal is 2-3 years away, you can lock the required amount in a fixed deposit. One should not wait any longer," says Preeti Zende, a Sebi-registered investment advisor and founder of Apna Dhan Financial Services.
This is because once the rate cut cycle starts, banks will follow suit by lowering their lending rates as well as interest rates on term deposits. Here, we list out the top seven banks which offer high interest rates on their three-year fixed deposits (FDs).
It is noteworthy that one-year FDs do not offer the highest returns and five-year tenure is too long a period for someone with financial goals lined up in the near future.
Therefore, one can explore the prospect of locking money in three-year fixed deposits (FDs) at a bank of one's choice.
As one can see in the table below, the private lender HDFC Bank offers 7 percent interest to general citizens and 7.5 percent to senior citizens on its three-year fixed deposits. These rates came into force on July 24 this year. ICICI Bank also offers the same rates i.e., 7 percent and 7.5 percent to general and senior citizens.
| Bank | General (%) | Senior Citizens (%) |
| HDFC Bank | 7 | 7.5 |
| ICICI Bank | 7 | 7.5 |
| SBI | 6.75 | 7.25 |
| Punjab National Bank | 7 | 7.5 |
| Union Bank of India | 6.7 | 7.2 |
| Federal Bank | 7 | 7.5 |
| Kotak Mahindra Bank | 7 | 7.6 |
(Source: Banks' websites)
Another private lender Kotak Mahindra Bank offers 7 percent to general citizens and 7.6 percent to senior citizens on its 3-year-FDs. These rates came into force on June 15. Federal Bank also offers 7 percent and 7.5 percent to general and senior citizens, respectively, on its 3-year fixed deposits.
When it comes to the state lenders, the interest rates are somewhat lower. State Bank of India (SBI) offers 6.75 percent to general citizens and 7.25 percent to senior citizens on 3-year-FDs. These rates came into force on June 15.
Punjab National Bank offers 7 percent to general citizens and 7.5 percent to senior citizens on 3-year-fixed deposits. These rates came into force on October 1. Union Bank of India offers 6.7 percent to general citizens and 7.2 percent to senior citizens on three-year fixed deposits. These are the latest rates which came into force on August 2.
Meanwhile, it is also important to mention that one should allocate only a small to moderate portion of overall portfolio to fixed deposits since the returns on FDs are in single digits and on the top of it, they are taxable.
"Just because current FD rates are lucrative, one should not get tempted to lock a major chuck of your money only in FDs. These deposits are taxable and in the long run, they fail to generate inflation-hedged returns," adds Ms Zende.
Note: This story is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment related decision.
