HDFC Bank hikes FD interest rates for these tenors

Investing in an FD

A fixed deposit (FD) allows you to put money aside for a specific amount of time (tenure) and earn a predetermined rate of interest. A fixed deposit often earns a greater interest rate than a conventional savings account until the term ends.

Fixed deposit interest rates vary depending on the tenor of the FD. Some banks charge a penalty for breaking the FD midway, so it is best to create an FD ladder and make best use of it.

As a result, FD investors should double-check the tenure and interest rate that best meets their needs. Here are banks offering best interest rates in 3 year fixed deposits.

DCB Bank

DCB offers tenure ranging from 7 days to 10 years. Minimum deposit amount as low as Rs 10,000. One can choose to take interest payout on monthly, quarterly, half yearly, and yearly basis. The interest rate offered on 3 year bank FD is 6.60 percent.

Indusind Bank

The bank has revised fixed deposit interest with effective from June 1, 2022. According to Bank website, “*Interest is compounded quarterly. Simple interest will be paid on maturity for deposit wherever the tenure is upto 180 days.” The interest rate offered on 3 year bank FD is 6.50 percent.

RBL Bank

RBL revised its bank fixed deposit with effect from June 8, 2022. RBL Bank offers a variety of fixed deposit accounts with a number of unique features catering to different requirements. The interest rate offered on 3-year bank FD is 6.30 percent.

IDFC First Bank

The FD from IDFC FIRST Bank includes a lot of features and perks that can help you increase your money. Senior citizens get the added benefit of earning an extra 0.50 percent in interest. The interest rate offered on 3-year bank FD is 6.25 percent.

What is an FD?

A fixed deposit, often known as an FD, is a type of investment instrument offered by banks and non-banking financial institutions (NBFCs). You invest for a certain period of time and receive a fixed interest rate with FDs also, you will receive fixed returns regardless of how interest rates fluctuate or how the economy performs at the time of investing.

Banks offering best rate on 5 year FDs

DCB offers the best rate for 5 year bank fixed deposit, as of now it offers 6.60 and quarterly compounded return of 10,000 will be Rs 13872.27. Indusind Bank is offering 6.50 percent and quarterly compounded return of 10,000 will be Rs 13804.20. RBL Bank is offering interest rate of 6.30 percent and quarterly compounded return will be Rs 13669.00. IDFC First Bank and Karur Vysya Bank offer interest rates of 5.25 percent and 5.89 with quarterly compounded returns of Rs 13635.39 and 13336.47 respectively. (These interest rates are as on June 9, 2022.)

Create FD ladder

Distribute the amount of your FD over several years. Investing in FDs should be done in a 'laddering' way to minimise reinvestment risk and ensure liquidity. Instead of booking one large FD for the long term, you break it into parts when making an FD ladder. In a ladder, the amount is divided into smaller FDs, which are then booked one by one after an interval of 3-5 years, from the first to the last. With such a large gap between the first and last, your prospects of getting the best rate on your FD will be high.

Covered in DIGCC

Each bank customer is eligible for insurance up to a maximum of Rs 5,00,000 for both principal and interest amounts held in the bank if the bank license is cancelled or during liquidation as under Deposit Insurance and Credit Guarantee Corporation (DIGCC).

Go for Sweep-in FD

The excess money in the savings account is automatically moved into the fixed deposit whenever the amount in the savings account exceeds that stated limit. Your savings account balance will earn a higher rate of interest than if it were in a regular savings account.

According to HDFC Bank, “When you apply for the sweep-in facility, what the bank really does is, it breaks up units of the specified FD in units of Rs. 1. In doing this, it makes sure funds are available in your sweep-in Savings or Current Accounts, whichever is linked. With this, cheques or any other debit transaction from your account is not hindered due to lack of sufficient funds in your Savings/Current Account.”

Create an FD ladder to maximise returns from rising interest rates

Cheers for FD investors as RBI hikes rates again

Good days are finally here for fixed deposit (FD) investors as banks and other financial institutions have started to increase FD interest rates, albeit marginally.

Impact of RBI rate hike

A 90 basis points of hike in FD interest rate from 5.5% to 6.4 % means that on each 1 lakh rupee FD for 5 years you will end up getting Rs 5,958 additional interest payout.

Long-term vs short-term FD

Usually, it is the long-term FD that can see a higher increase in the interest rates compared to the short term at this stage. As the interest rate increases, we will continue to see these FDs offering better rates.

Is FD laddering a good option now?

Making an FD ladder helps you to break a big deposit into many parts and book each part after a time gap so that you get the average return and periodic liquidity when there is volatility in the interest rate. One can follow this concept very well for their contingency funds if they keep them parked in the bank account or FDs.