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Fixed deposit real returns are harder to achieve in an environment where interest rates are in a downtrend and inflation is rising. As a consequence, we constantly advise our readers to put their money in short-term fixed deposits as of now. Although fixed deposits have a variable duration ranging from seven days to ten years, we recommend investing in short-term fixed deposits in order to reduce interest rate risk. The rationale behind the same whenever there is an uptrend in interest rates banks always hikes their rates on short tenors. For example, on December 1, 2021, HDFC Bank increased its interest rates by 10 basis points over seven days to one year. By investing in fixed deposits for a short tenor, such as one year or two years, you can not only reduce interest rate risk but also have the opportunity to reinvest your maturity amount, increasing your return reward.
Another advantage is that you can utilise the Fixed Deposit Ladder strategy, which allows you to divide your deposit into various fixed investment instruments with variable tenors and protect your deposit and return from interest rate fluctuations. However, you will not be able to enjoy these benefits in long-term deposits such as 5 years since your deposits will be locked-in for the entire tenor and withdrawing your deposits prematurely will result in a penalty that will reduce your interest rate. Now that we've clarified why people should invest in short-term fixed deposits, let's look at which banks are now giving the best rates on fixed deposits with maturities of one to two years.
Top 10 Public Sector Banks Offering Highest Interest Rates On Fixed Deposits of 1 To 2 Year
According to my study, here are the top 10 public sector banks that are now offering the best rates on fixed deposits of less than Rs. 2 crore maturing in one to two years.
| Sr No. | Banks | Regular Interest rates (p.a) | Senior citizens | W.e.f. |
|---|---|---|---|---|
| 1 | Indian Overseas Bank | 5.15% | 5.65% | 09.11.2020 |
| 2 | Canara Bank | 5.10% | 5.60% | 09.08.2021 |
| 3 | Punjab & Sind Bank | 5.05% | 5.55% | 16.09.2021 |
| 4 | Union Bank of India | 5.00% to 5.10% | 5.50% to 5.60% | 01.09.2021 |
| 5 | State Bank of India | 5.00% | 5.50% | 08.01.2021 |
| 6 | Punjab National Bank | 5.00% | 5.50% | 01.08.2021 |
| 7 | Bank of India | 5.00% | 5.50% | 01.08.2021 |
| 8 | Central Bank of India | 5.00% | 5.50% | 10.11.2021 |
| 9 | Indian Bank | 4.95% to 5.10% | 5.40% to 5.60% | 05.11.2021 |
| 10 | UCO Bank | 4.90% to 5.00% | 6.40% to 6.50% | 16.11.2021 |
| Source: Bank Website |
Top 10 Private Sector Banks Offering Highest Interest Rates On Fixed Deposits of 1 To 2 Year
As per my research, the top ten public sector banks providing the highest rates on fixed deposits of less than Rs 2 crore with a maturity of one to two years are as follows.
| Sr No. | Banks | Regular Interest rates (p.a) | Senior citizens | W.e.f. |
|---|---|---|---|---|
| 1 | RBL Bank | 6.00% | 6.50% | 1st September 2021 |
| 2 | Yes Bank | 6.00% | 6.50% | 3rd November 2021 |
| 3 | IndusInd Bank | 6.00% | 6.50% | 23rd July 2021 |
| 4 | DCB Bank | 5.55% to 5.95% | 6.05% to 6.45% | November 22, 2021 |
| 5 | Bandhan Bank | 5.50% | 6.25% | June 7, 2021 |
| 6 | IDFC First Bank | 5.25% | 5.75% | November 23, 2021 |
| 7 | South Indian Bank | 5.20% | 5.70% | 8th October 2021 |
| 8 | Karur Vysya Bank | 5.15% | 5.65% | 08.10.2021 |
| 9 | Axis Bank | 5.10% to 5.25% | 5.75% to 5.90% | 14/12/2021 |
| 10 | Nainital Bank | 5.10% to 5.35% | 5.60% to 5.85% | 10th September 2021 |
| Source: Bank Website |
Top 10 Small Finance Banks Offering Highest Interest Rates On Fixed Deposits of 1 To 2 Year
Based on my findings, the following are the top 10 small finance banks that offer the best rates on fixed deposits of less than Rs 2 crore with a term of one to two years.
| Sr No. | Banks | Regular Interest rates (p.a) | Senior citizens | W.e.f. |
|---|---|---|---|---|
| 1 | North East Small Finance Bank | 6.75% | 7.25% | 19th April 2021 |
| 2 | Ujjivan Small Finance Bank | 6.5% to 6.60% | 7.25% to 7.35% | 09.12.2021 |
| 3 | Jana Small Finance Bank | 6.50% | 7.00% | 07/05/2021 |
| 4 | Suryoday Small Finance Bank | 6.50% | 6.75% | September 09, 2021 |
| 5 | Shivalik Small Finance Bank | 6.00% to 6.75% | 6.25% to 6.75% | December 1st, 2021 |
| 6 | Utkarsh Small Finance Bank | 6.25% to 6.00% | 6.75% to 6.50% | July 01, 2021 |
| 7 | Capital Small Finance Bank | 6.00% | 6.50% | June 3, 2021 |
| 8 | Fincare Small Finance Bank | 6.00% | 6.50% | 25th October 2021 |
| 9 | ESAF Small Finance Bank | 6% to 6.25% | 6.50% to 6.75% | 01/12/2021 |
| 10 | Equitas Small Finance Bank | 5.85% to 5.75% | 6.35% to 6.25% | 1st October 2021 |
| Source: Bank Website |
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