Every investor dreams of risk-free growth. Amidst the volatility of the stock market and the fluctuations of mutual funds, Bank Fixed Deposits (FDs) remain the most reliable pillar of safe investment. If you’re looking for fixed returns and guaranteed profits, a 5-year FD could be an excellent option. Currently, many small finance banks and private banks are offering robust interest rates of up to 8%, making investors prosperous.
Small Finance Banks
If you’re looking for maximum interest on your investments, small finance banks are currently leading the market. These banks are offering much better rates than commercial banks to attract new customers. Banks like Suryoday Small Finance Bank and Jana Small Finance Bank are offering robust interest rates of around 8.00% on 5-year FDs.
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Utkarsh Small Finance Bank offers a rate of around 7.50%, while Ujjivan and RBL Bank offer rates of 7.20%. Banks like Equitas, DCB, and Yes Bank also offer attractive returns of 7.00%. These banks’ robust rates indicate that with a little research, you can earn significant returns on your deposits.
State of Private and Public Sector Banks
Private sector banks are known for their excellent digital services and large network. Interest rates may be slightly lower than those of small finance banks, but financial stability is quite strong. IDFC First Bank offers an interest rate of around 7.00%, while ICICI Bank and Tamilnad Mercantile Bank offer rates of around 6.60%. Axis Bank offers 6.45%, and HDFC Bank offers 6.40%.
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Meanwhile, public sector banks are still synonymous with trust. Considered the most reliable, State Bank of India (SBI) offers a 5-year FD interest rate of around 6.05%. Bank of Baroda offers 6.40%, and PNB offers 6.25%. Union Bank and UCO Bank offer rates of around 6.10%. Despite the low interest rates, senior investors often choose these banks due to their robust security and government guarantee.
Return on an investment of ₹1 lakh
Let’s understand how much money you would have in your hands after 5 years if you invest ₹100,000. If you earn an annual interest rate of 8%, with the magic of compounding, your amount would grow to approximately ₹148,595 after 5 years. This means you’ll earn a substantial ₹48,595 in interest alone.
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Furthermore, if you choose a tax-saving FD, you also get the benefit of a deduction of up to ₹1.5 lakh under Income Tax Section 80C. This means substantial interest earnings and substantial tax savings—this dual benefit makes your investment even stronger.
Consider Before Investing
As easy as it is to invest in an FD, choosing the right bank is equally important. While small finance banks offer higher returns, public sector banks offer guaranteed security. You should choose a bank based on your financial goals. Also, remember that FD rates vary from time to time and are entirely at the bank’s discretion. Therefore, before investing, be sure to check the bank’s nearest branch or its official website.