This may be a good time to invest in fixed deposits

People often go to great lengths to compare and check for best interest rates before putting their hard-earned savings into a fixed deposit. To lure them, the State Bank of India, or SBI, has increased interest rates on short-term retail fixed deposits by up to 75 basis points (bps). The other banks are expected to follow suit.

The revised rates for deposits, that came into effect from Wednesday, May 15, is the first increase by the bank since December 2023.

Fixed deposit is one of the most preferred options where a certain amount of money is placed with banks for a specific period at a fixed rate of interest. People, who opt for FD as an investment option, look for the safest investment option, but also look to get respectable returns.

The revision in deposit rate comes a week after SBI chairman, Dinesh Khara, told analysts that the bank’s cost of deposits had plateaued somewhere in the months of October-December 2023.

“My sense is that we don’t expect the net interest margin should undergo significant change and has actually moved up from 3.41 per cent to 3.43 per cent from December to March,” Khara said.

Other banks to jump in competition?

A report by Business Standard quoted a senior Bank of India (BOI) executive saying: “When the largest bank has taken a decision, others will follow suit. It is a question of time. The competition is from within (amongst banks) as well as from other segments like Mutual funds."

Meanwhile, Bank of Baroda’s (BOB), chief economist, Madan Sabnavis, said the rate revision is a reflection of bank-specific asset liability management conditions and strategy for keeping in growth expectations.

What are SBI’s new short-term FD rates?

In the retail term deposits below Rs 2 crore, maturing between 49 and 179 days, the revised interest rate is 5.5 per cent, up from 4.75 per cent.

For the same tenure, senior citizens will now get an interest rate of 6 per cent, up from 5.25 per cent before the latest revision.

The new rate for deposits maturing between 180 and 210 days bracket is 6.0 per cent, up from 5.75 per cent. For senior citizens, it has been revised to 6.50 per cent from 6.25 per cent.

For fixed deposits maturing between 211 days and one year, SBI is giving 6.25 per cent interest as against 6.0 per cent. For senior citizens, the rate has increased to 6.75 per cent from 6.50 per cent on similar maturity deposits.

SBI hikes bulk term deposit rates

SBI, the country’s largest lender, has also increased interest rates on domestic bulk term deposits (Rs 2 crore and above) by 10 to 50 bps across different maturities.

For bulk deposits maturing between 46 to 179 days, the increased interest rate is 6.25 per cent, up from 5.75 per cent.

On bulk deposits with maturity between one year and less than two years, the interest rate has been raised to 7 per cent, up 20 bps from 6.80 per cent.

Highest FD interest rates offered by other banks

Currently, the best return on fixed deposits by a public sector bank is offered by the Bank of Baroda (BOB). It has been giving 7.25 per cent interest on three-year deposits.

Among private banks, Yes Bank, IndusInd Bank, and IDFC Bank are offering 7.25 per cent for different tenures.