Although FD interest rates provided by leading banks have fallen, here we are going to discuss why a few private banks and small finance banks still deliver FD returns for certain tenures as high as seven percent. Interest rates on fixed deposits (FD) are significantly dropped and this is an unforgettable matter of the current year. In general, since the beginning of 2020, SBI fixed deposit rates have dropped by anywhere from 85 basis points to 160 basis points. But although major banks such as SBI and other large private banks deliver four to five percent per year for the tenure of one to two years, is that the standard across the field of fixed deposits investment?
Although the trend of low interest rates continues and customers are worrying about decreasing returns, some banks are still reinforcing the trend. Few banks could be keen to drive FDs between a tenure of one and two years which is why they are able to provide better yields. Yes Bank is one such example. Yes Bank offers a rate between 6.75 percent and seven percent for deposits between 6.75 percent and seven percent for the tenure of one or less than two years. Actually, the bank has further liability to rally. It would be tough for Yes Bank to glance at intense capital raising from external sources, so they are seeking to drive interest rates because of that consideration. IndusInd Bank, a private bank, also provides returns up to seven percent for one to two-year deposits. Since the takeover of Bharat Financial, the bank has changed its identity. They have more mid-sized companies and are now heading into small-sized loans in a large manner.
Small Finance Banks are the other group of lenders where returns on FDs are higher than large banks. For deposits of one to two years, Ujjivan Small Finance Bank provides 6.50 per cent returns. For one to two years, Jana Small Finance Bank provides seven percent interest rate. The interest rate was set at 6.75 percent by Equitas Small Finance Bank and between 6.50 percent and 6.60 percent by AU Small Finance Bank for one to two years of tenure respectively. Small finance banks typically have asset holdings with a very high interest rate. They can therefore afford higher interest payouts as they rally deposits effectively when they have assets on the other hand which they have provided at decent returns. A higher risk tolerance, an extreme need to mobilise capital, and high interest rate lending are pushing a few banks to bid higher returns on FDs. In view of the sharp gap in rates between big giant banks and those offering higher rates, one must always opt for the safety first instead of returns before parking their funds.