FDs catch fancy again

Vijay C Roy

RISING interest rates over the past one year have made bank fixed deposits (FDs) popular once again. Since the fixed deposits offer liquidity and assured returns, investors are considering this the best time to go in for FDs, which can be useful for building an emergency corpus.

According to experts, due to the volatile stock markets, sluggish mutual funds and rising interest rates, middle-class individuals and pensioners have started looking at FDs as an investment avenue. To cash in, banks are offering attractive interest rates on select FD tenures.

While most scheduled commercial banks are offering interest rates of up to 8 per cent, small finance banks (SFBs) and non-banking financial companies (NBFCs) are offering interest rates of up to 9 per cent. Most banks are also offering higher interest rates to senior citizens.

For example, the country’s largest lender SBI is offering an interest rate of up to 7.10 per cent (for 400 days) to general public. Private sector lender HDFC Bank is offering interest rates of up to 7.1 per cent (for 15 to 18 months) on FDs. One can get an interest of up to 7.25 per cent on fixed deposits (for 666 days) in Punjab National Bank. For senior citizens, most of the banks are offering interest rates higher by at least 0.50 per cent. Yes Bank is offering up to 8.25 per cent interest to senior citizens.

According to bankers, with bank rates turning attractive and one-year real returns being positive, customers have started shifting their funds from savings bank and current accounts to fixed deposits (FDs).

The rise in interest rates, however, has not been uniform across tenures and it varies depending on the tenure.