RBI maintained the repo rate at 4.00 percent and the reverse repo rate at 3.35 percent on April 7, 2021. In comparison, the bank rate and the marginal standing facility rate are also 4.25 percent. This was done to limit the economic disruption incurred by the second wave of Covid-19. This is an alarming factor for many risk-averse investors, such as senior citizens, who rely on their FD (fixed deposit) returns not only to achieve their financial targets but also to cover their retirement life. However, there are some banks promising higher FD returns at the moment. Following a comprehensive risk analysis and if it is in accordance with their expected returns and risk tolerance, investors may take into account investing a portion of their funds in such banks. Hence, below are the top 10 private sector banks that are currently providing higher interest rates on fixed deposits. Please note that we have only looked at the highest interest rates on FDs for an amount of less than Rs 2 Cr.
Private Sector Bank FDs
|Banks||Tenure||ROI for general public||ROI for senior citizens||W.e.f.|
|Yes Bank||3 Years to <= 10 years||6.75%||7.50%||8th Feb 2021|
|DCB Bank||36 months to 120 months||6.75%||7.25%||5th Feb 2021|
|RBL Bank||60 months to 60 months 1 day||6.60%||7.10%||12 April 2021|
|IndusInd Bank||3 to 5 years||6.50%||7.00%||30th December 2020|
|The Tamil Nadu State Apex Co-operative Bank||5 Years and above||6.00%||6.00%||9th December 2020|
|Karur Vysya Bank||3 to 5 years||6.00%||6.15%||11th Jan 2021|
|Bandhan Bank||1 to 3 years||5.75%||6.50%||Feb 3, 2021|
|Axis Bank||5 years to 10 years||5.75%||6.50%||18 March, 2021|
|City Union Bank||551 days to 3 years||5.75%||6.25%||16 Dec, 2020|
|Tamilnad Mercantile Bank||1 to less than 2 years||5.75%||6.25%||1 Sept, 2020|
Tax benefits on fixed deposits
The tax on FD interest is withheld according to your tax slab rate category. Add the received interest income to the net income to get the tax slab rate. If the earned interest is more than Rs 10,000 for regular investors and Rs 50,000 for senior citizens, banks and non-banking financial firms deduct TDS (Tax Deducted at Source). TDS is normally deducted at a rate of 10%; but, if the investor fails to submit a PAN card, the rate increases to 20%. Tax deductions under section 80C of the Income Tax Act of 1961 can be gained by investing in a fixed deposit for a period of five years. A limit of Rs 1.50 lakh can be claimed as a deduction in a fiscal year.
Deposit insurance benefit
If a bank defaults, a depositor's sole coverage is the Deposit Insurance and Credit Guarantee Corporation (DICGC) which is a subsidiary of RBI. Savings accounts, fixed deposits (FD), current accounts, recurring deposits (RD), among other deposits are covered by DICGC's insurance. Each depositor in a bank is covered up to a limit of Rs 5 lakh for both principal and interest amounts owned by her/him, according to DICGC rules. If a bank defaults and your principal deposit amount is Rs 5 lakh with that bank, you will only get this amount back, not the interest earned on your deposits. But if the total amount of the principal and interest earned is less than Rs 5 lakh, you will get the entire amount back. FDs satisfy all of your objectives, considering them a must-have for all types of investors whether you're seeking for security, certainty, or pure convenience in terms of returns. Furthermore, because of the unifying presence of this instrument, it can be used for a variety of purposes by various types of investors.