Fixed deposit rates in India are seeing a notable shift as small finance banks begin offering interest rates as high as eight percent. This marks a significant rise compared with the rates currently offered by large public and private sector banks. The move has attracted the attention of conservative investors seeking higher returns on safe investment options.
Several small finance banks are leading the way with these attractive rates. Banks such as Suryoday Small Finance Bank and Shivalik Small Finance Bank are offering eight percent on select tenures. Senior citizens at some of these banks can earn slightly higher interest, providing an additional advantage for older investors.
In comparison, major banks are offering rates around six to six point five percent, creating a substantial gap. The higher rates at small finance banks are a result of their reliance on retail deposits to fund lending and growth. These banks often provide better yields to attract customer funds and remain competitive.
Investors should consider tenure, liquidity, and the insured limit when opting for these deposits. Deposits up to five lakh rupees per bank are insured, offering a safety net for depositors. It is advisable to split funds across multiple banks to stay within this limit and minimize risk.
While small finance banks offer higher returns, they may carry slightly higher credit risk compared with larger banks. Interest earned on fixed deposits is fully taxable, and tax deduction at source may apply unless eligible forms are submitted. Despite these considerations, the new rates present an opportunity for conservative investors to earn better returns while keeping their investments secure.
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