Suryoday, Ujjivan & ESAF: These small finance banks offer 8% interest on FDs

For risk-free investors, this is the best time to park their money in fixed deposits. Reason: With the rise in repo rates -- essentially the rate at which banks borrow from the Reserve Bank of India (RBI) -- interest rates are also on an upward trajectory.

While big banks such as SBI, ICICI Bank and HDFC banks are offering interest rates between 6 and 7 per cent for different tenures, there are many small finance banks such as Suryoday Small Finance Bank, Ujjivan Small Finance Bank, ESAF Small Finance Bank and Non-Banking Finance Companies (or NBFCs) such as Shriram City Union Finance and Shriram Transport Finance who are offering 8 per cent to depositors for different tenures.

Consider this: According to BankBazaar’s data, Suryoday Small Finance Bank is offering the highest rate of 8.01 per cent for a tenure of 999 days. For senior citizens, the rate is 8.26 per cent for the same period. For Ujjivan Small Finance Bank, the highest interest rate is 8 per cent for a term of 560 days (8.75 per cent for senior citizens). ESAF Small Finance Bank also offers 8 per cent for 999 days (8.50 per cent for senior citizens). Similarly, Shriram City Union Finance and Shriram Transport Finance offering 8 per cent for 60 months tenure.

Though fixed deposit rates have risen recently, it has always been a matter of debate on whether bank deposits are still the preferred choice of instrument for financial savings. According to research reports by Bank of Baroda, with a changing financial landscape, volatility in the interest rate regime and increasing risk-taking appetite, there tends to be a change in the pattern of deployment of financial savings. RBI’s recent report on the financial assets of households shows that there has been a shift in the pattern where mutual funds and equity witnessed a sharp increase in FY22 with shares of 6.3 per cent and 1.9 per cent in overall financial assets respectively (the ratio was 2.6 per cent and 1.1 per cent in FY20), while the share of bank deposits declined to 25.5 per cent in FY22 from 34.4 per cent in FY20.

Also read: Bank of Baroda, Canara Bank, Bank of India offer 7% and more on fixed deposit schemes: Compare bank FD rates here

Similarly, banks continue to remain the preferred choice for consumers when compared with small saving schemes. However, small savings have the benefit of offering higher rates as these are adjusted only periodically and linked to market rates.