A fixed bank deposit brings some succour in the current unsafe scenario of equity and debt markets. As the odds of losing their principal are minimal, those in the lower tax brackets find bank FDs enticing. The five-year tax-saving FD is among the multiple deposit tenures that banks bid. Under Section 80C, this FD provides income tax deductions of up to Rs 1.5 lakh. Some other tools such as tax-saving equity funds and the Public Provident Fund (PPF), are also liable for tax deductions. There are several banks that offer you relatively high rates, even though bank FD rates have dropped to low rates. With a five-year FD rate and interest rate of 6.95 percent, DCB Bank is at the top. The highest rate proposed on a 5-year tax-saving FD by a public-sector bank is the State Bank of India, which provides 5.40 percent. You get Rs 1.96 lakh after five years if you deposit Rs 1.5 lakh in the SBI five-year tax saving FD. The top 10 highest rates covered below are only for general public and are summed up by two small finance banks-AU Small Finance Bank and Ujjivan Small Finance Bank.
|Banks||ROI per annum in %|
|AU Small Finance Bank||6.50|
|City Union Bank||6.00|
|Karur Vysya Bank||6.00|
|Lakshmi Vilas Bank||6.00|
|Ujjivan Small Finance Bank||5.80|
In order to preserve customers and depositors, smaller banks with a low customer pool usually offer higher rates. That's why cheaper rates are provided by government-owned banks. Only because a bank is giving you a high rate doesn't always mean that you can invest in it. Head for higher rates undoubtedly, but also consider comparatively larger banks with an excellent past record and strong customer base.