A fixed deposit (FD) is a secure investment option that allows you to earn interest on a lump sum of money over a fixed period. Many people prefer to lock their savings into fixed deposits, which act as a precautionary fund for planned expenses. The interest rate is determined at the time of opening the deposit and depends on the term length for which the amount is locked. Fixed deposits typically offer higher interest rates compared to savings accounts. Additionally, senior citizens are often eligible for even higher interest rates. Longer-term deposits usually come with higher interest rates, whereas shorter terms yield lower interest.

Banks Which Offer Higher Interest Rates

Here are the top banks offering higher interest rates on fixed deposits, with the higher rates applicable to long-term deposits. The latest interest rates offered by top banks for terms ranging from seven days to 10 years as of December 2024 are listed in the table below:

HDFC Bank

This private bank offers 7.4 percent interest on its fixed deposit with tenure of 5 Years for the regular depositors. Senior citizens are entitled to receive 7.9 percent on this tenure.

Kotak Mahindra Bank

Kotak Mahindra Bank offers the same highest interest rate that of HDFC. The private lender offer 7.4 percent to general citizens on a fixed deposit of 390 to 391-day tenure. Senior citizens are offered an extra 50 basis points i.e., 7.9 percent. These interest rates came into force on June 14, 2024.

Federal Bank

Again this bank offers an interest of 7.4 percent and 7.9 percent to general citizens and senior citizens, respectively on a fixed deposit of 777-day tenure.

State Bank of India (SBI)

The largest bank in the country offers 7 percent and 7.5 percent interest to general and senior citizens on an FD of tenure between 2-3 years. These rates came into force on June 15, 2024.

Karnataka Bank

Karnataka Bank offer a rate of 7.50 percent interest to general people and 7.75 percent to the senior citizens.

Bank of Baroda

BOB offers 7.3 percent and 7.8 percent on an FD of 400-day tenure, as per the rates announced on Oct 14 this year.

Union Bank of India

This state lender has revised their interest rates of FDs. It offers an interest of 7.3 percent on a fixed deposit of 456-day tenure to general citizens. 50 basis points offered extra for senior citizens.

RBL Bank

According to RBL Bank, it offers an interest rate of 8 percent on general fixed deposits and 8.50 percent for senior citizens.

Bandhan Bank

Bandhan Bank offers an interest rate 8.05 percent for the normal people and 8.55 percent for the senior citizens.

IndusInd Bank

IndusInd Bank is said to offer 7.99 percent and 8.49 percent for the general and senior citizens respectively.

The Other Attractions of FD

The Reserve Bank of India (RBI) has issued revised guidelines for fixed deposits (FDs) with non-banking financial companies (NBFCs) and housing finance firms. Key highlights include:

Penalty-Free Withdrawals for Small Deposits

FD holders can withdraw amounts below ₹10,000 before maturity without incurring any penalties.

Critical Illness Clause

Individuals diagnosed with critical illnesses are allowed to withdraw the full FD amount before maturity.

Premature withdrawal of a fixed deposit

A fixed deposit offers an investor a fixed rate of interest on a lump sum amount deposited with a bank for a specific period. The rate can be determined by using a fixed deposit return calculator. Premature fixed deposit withdrawal means the investor withdraws the fixed deposit before the maturity date.

Penalty

It should be noted that the fixed deposit withdrawals made early usually result in penalties. Penalty charges vary from bank to bank and usually entail a reduction in interest rate. The penalty of premature withdrawal of fixed deposit can be between 0.5% and 1%.