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These 3 Small Finance Banks Offering Interest On FD Up To 7.25%, Long Term And Short Term Comparison, Risks
Small finance banks generally offer better interest on Fixed Deposits (FD) rather than other banks, both in the long term and short-term investments. Hence, while it comes to FD, people should always check the interest rates offered by small finance banks. Here is a comparison of interest rates offered by banks for the amount below Rs. 2 crores.
Comparison in long term
According to recent interest rates by, Ujjivan Small Finance Bank, on FD for 3 Years and 1 Day to 5 Years, giving 6.25% interest to public and 6.25% interest to the senior citizens. However, the State Bank of India (SBI), is offering 5.40% interest to the general public and 6.20% interest to senior citizens on FDs for 5 years and up to 10 years. On the other hand, for FD up to 5 years to 10 years, Axis Bank's interest rate for the public is 5.75%, while the rate for a senior citizen is 6.50%. But, Ujjivan Small Finance Bank is giving interest rates for senior citizens for 5 years to 10 years FD, at 6.50%.
One should remember, Ujjivan Small Finance Banks' interest rate for 2 Years to 3 years FD, is higher for both public and senior citizens, at 6.50% and 7.00% respectively. But, Compared to these banks, Jana Small Finance Bank is offering 6.75% interest to the public and 7.25% to senior citizens for 3 years to 5 years FD. So, having an account in the Jana Small Finance Bank can be profitable for an investor who is thinking to invest in a long-term FD.
| Bank | Tenure | Interest for public | Interest for senior citizens |
|---|---|---|---|
| Ujjivan Small Finance Bank | 3 Years and 1 Day to 5 Years | 6.25% | 6.75% |
| Jana Small Finance Bank | 3 Year to less than 5 Years | 6.75% | 7.25% |
| Utkarsh Small Finance Bank | 701 Days to 3652 Days | 6.00% | 6.50% |
Comparison in short term
For the short term, FD, Ujjivan Small Finance Bank, and Jana Small Finance Bank both might not act very profitable, because they offer 2.50% to 6.00% interest. On the other hand, Utkarsh Small Finance Bank is offering 7.25% interest on 700 days FD (effective from August 11, 2021). For the senior citizens, the rate is 7.25%, while for the general public the rate is 6.75%. For a 364 day FD, the Utkarsh Small Finance Bank also gives 5.75% to the public, and 6.25% to the senior citizens.
Compared to other banks like Axis, small finance banks' interest rates are better. Axis bank offers 5.10% interest to the public, and 5.75% interest to the senior citizens for 1 year 5 days FD, and the rates are around 4.65% for lower tenure.
| Bank | Tenure | Interest for public | Interest for senior citizens |
|---|---|---|---|
| Ujjivan Small Finance Bank | 180 Days to 364 Days | 4.75% | 5.25% |
| Jana Small Finance Bank | 181-364 days | 5.50% | 6.00% |
| Utkarsh Small Finance Bank | 181 Days to 364 Days | 5.75% | 6.25% |
Risk factor
If you are shying away from the FD investment in small finance banks, because you are afraid of the risk factor, then you can start investing with a smaller amount. The small finance banks like Utkarsh Small Finance Bank, Ujjivan Small Finance Bank, and Jana Small Finance Bank are completely regulated by the RBI. They maintain the cash reserve ratio (CRR) requirements, statutory liquidity ratio requirements like other banks. Also, they are certainly required to maintain capital adequacy of 15% of the risk-weighted assets. This makes a bank safe for your investment.
But if you are uncertain about it, then invest an amount less than Rs. 5 lakhs in an FD. This amount is insured under the deposit insurance program of DICGC, India. So, the money will not be at risk. If you have a larger amount to invest in FDs, then you can spread your investments in different banks, or multiple FDs, so the money will be less exposed to risks.
