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Fixed deposits (FD) are one of the most popular investment avenues in the country. Most believe that FDs offer higher interest rates than savings accounts.
But the situation on the ground is quite different.
Several major banks of the country are offering higher interest rates on savings account than FDs.
FD vs Savings A/cs
HDFC Bank has revised Fixed Deposit interest rates just two weeks ago. Now it is offering only 2.5% interest on FDs 7 days to 29 days for the general public. On the other hand, the interest on savings account is 3%.
Minimum interest rates on FDs offered by other top private banks — ICICI Bank, Axis Bank, Kotak Mahindra Bank and IndusInd Bank — are 0.50 to 1.75 percentage points less than savings rate.
ICICI Bank and Axis Bank also offering 2.5% interest on FDs between 7 days to 29 days tenure. Both banks are paying 3% interest on savings account balance.
Kotak Mahindra Bank and IndusInd Bank give 2.5% and 2.75% interest on FDs between tenure of 7 days to 30 days respectively.
But interest in savings bank account in Kotak Mahindra Bank is 3.5% while interest rate on savings account balance offered by IndusInd Bank is between 4% and 5.5%.
Public Sector Banks
The scenario is marginally different in public sector banks. State Bank of India (SBI) offers 2.9% per annum interest rate on FDs for tenure of 7 days to 45 days to its customers. On the other hand, interest rates on savings account offered by the country’s largest lender is 2.75%.
In Punjab National Bank (PNB) and Union Bank of India (UBI), there is no difference between interest rates on savings accounts and minimum FD rates (tenure 7 days to 45 days). Both are offering 3%.
The Motive
An official of ICICI Bank told Money9 that the interest rates have been brought down below the savings account rates since the bank wants to discourage customers from going in for the smallest tenures.
However, according to Reserve Bank of India guidelines, banks have to offer FDs of all durations.