Bank Fixed Deposit Interest Rates in India - November 2011

With the stock market being as volatile as it is, investors are looking for safer investment options that guarantee both the principle and the interest. At this Juncture, Fixed Deposits are the best Investment option for the Risk Averse Investor. With Banks in India offering more than 9% per annum (Even 10% in some cases) on Fixed Deposits, this is the best time to invest in Fixed Deposits if you have surplus cash.

Below are the Best Interest Rates available from various Banks in India.

Note: This is not a consolidated List. Only the Timeframes where the Bank is offering the best Rate of Interest is chosen. For the full list, please visit the respective bank websites.


Nationalized Banks:

1. State Bank of India

Time Period	Rate of Interest
91 days to 179 days	7.25%
241 days to Less than 1 year	7.75%
> 1 year	9.25%

Extra 0.5% for Senior Citizens.

2. Punjab National Bank

Time Period	Rate of Interest
180 days to Less than 1 year	8%
1 year	9.25%
555 days	9.3%
777 days	9.35%
1000 days	9.4%

Extra 0.5% for Senior Citizens.

3. Indian Bank

Time Period	Rate of Interest
181 days to Less than 9 months	7.25%
9 months to Less than 1 year	9.25%
1 to 3 years	9.5%

Extra 0.75% for Senior Citizens.

4. Indian Overseas Bank

Time Period	Rate of Interest
91 days to 120 days	7.75%
180 days to 269 days	8%
270 days to 332 days	8.5%
1 year to 443 days	9.25%

Extra 0.75% for Senior Citizens.

5. IDBI Bank

Time Period	Rate of Interest
46 days to 90 days	7%
91 days to less than 6 months	8%
6 months to 269 days	9%
270 days to 1 year	9.25%
1 year to 499 days	9.5%

Extra 0.75% for Senior Citizens.

6. Bank of Baroda

Time Period	Rate of Interest
1 year to 443 days	9.25%
444 days	9.35%

Extra 0.75% for Senior Citizens.

Private Banks:

1. ICICI Bank

Time Period	Rate of Interest
190 days	7.75%
390 days	9.25%
590 days	9.25%

Extra 0.5% for Senior Citizens.

2. HDFC Bank

Time Period	Rate of Interest
6 months 16 days	7.75%
9 month 16 days	8%
1 year 1 day to 1 year 15 days	9%
1 year 16 days	9.25%

Extra 0.5% for Senior Citizens.

3. Karur Vysya Bank

Time Period	Rate of Interest
31 days to 270 days	7.65%
271 days to Less than 1 year	8.5%
1 year to 3 years	9.75%

Extra 0.5% for Senior Citizens.

4. Axis Bank

Time Period	Rate of Interest
3 to 6 months	7%
6 months to Less than 1 year	7.5%
1 year 1 day to 14 months	9.4%

Extra 0.75% to 1% for Senior Citizens depending on time period chosen.

5. Kotak Mahindra Bank

Time Period	Rate of Interest
91 days to 180 days	7.75%
181 days to 270 days	8.75%
271 days to less than 1 year	9.5%
1 year to 389 days	9.5%

Extra 0.5% for Senior Citizens.

Pick of the Lot:

Short Term (Approximately around 6 months)

Bank Name	Rate of Interest	Deposit Period
HDFC Bank	7.75%	6 month 16 days
ICICI Bank	7.75%	190 days
Punjab National Bank	8%	180 days to Less than 1 year
State Bank of India	7.25%	91 days to 179 days
Indian Bank	7.75%	181 days to 9 months
Axis Bank	7.5%	6 months to Less than 1 year
Karur Vysya Bank	7.65%	31 days to 270 days
Indian Overseas Bank	7.75%	91 days to 120 days
IDBI Bank	8%	91 days to Less than 6 months
Kotak Mahindra Bank	7.75%	91 days t0 180 days

Long Term (1 year or More)

Bank Name	Rate of Interest	Deposit Period
HDFC Bank	9.25%	1 year 16 days
ICICI Bank	9.25%	390 days
Punjab National Bank	9.35%	777 days
State Bank of India	9.25%	Greater than 1 year
Indian Bank	9.5%	1 to 3 years
Axis Bank	9.4%	1 year to 14 months
Karur Vysya Bank	9.75%	1 to 3 years
Indian Overseas Bank	9.25%	444 days
Bank or Baroda	9.35%	444 days
IDBI Bank	9.5%	500 days
Kotak Mahindra Bank	9.5%	1 year to 389 days

Important Disclaimer: The Article above is not an investment advise. All Interest Rate numbers were picked up from the respective bank websites as of November 2011. Banks may change their rates from time to time and the author does not guarantee accuracy of the dates if the Banks wish to change their rates.

Happy Depositing!!!

Awesome News for Savings Account Holders

In one of my earlier posts Good News for Savings Account Holders I had explained the fact that Savings account interest rates have been hiked to 4% from the 3.5%. Recently the Reserve Bank of India (RBI) came up with another blockbuster announcement.

What is this Announcement?

Banks can set their own rates for Savings Accounts

This means that, banks can essentially set the rate of interest they choose to pay for money held in savings accounts to their customers.

What does this mean?

This means that, you are not stuck with the flat 4% rate of interest for savings accounts across all banks. Banks can decide what interest they wish to pay on savings accounts to attract customer deposits.

Earlier, since the rate of interest was a flat 4% in all banks, customers chose banks based on proximity to their home/office, features offered etc while selecting banks. Now, banks that offer higher interest rate on savings accounts will be preferred over those that offer lesser rate of interest.

Is this Good News?

Yes & No. Of Course, this depends on whether you are the Customer or the Bank.

Yes - For the Customer:

1. Your money that is laying idle in your savings account is going to earn a much higher rate of Interest
2. You need not worry about creating a Fixed Deposit & Breaking it when you need cash. Instead you can just let it stay in your Savings account and take it whenever you wish to.

No - For the Bank:

1. If your competitor banks are offering a higher rate of interest, you too would have to do so, to attract or rather retain your customers. If ICICI Offered me 4% and HDFC Offers me 5% for the same savings account, I would rather shift my account to HDFC to take advantage of the higher interest rate they offer me.
2. Most banks will take a hit in their profit margin. Offering a higher interest rate on Savings Accounts essentially means leaner profit margins. This will affect their stock prices because, customers tend to dump stocks whose profit margins go down
3. Managing Liquidity would be an Issue. When a bank has to offer a higher interest rate, they can do so only if they lend out the money to loan customers. They cant lend all of it because they have to maintain a liquidity ratio to meet customer withdrawal demands. So, banks have to work harder now to make profits.

Are there any Side-Effects for Customers?

Of Course YES. Every coin has two sides and even this news has its downfalls. Since the bank has to offer a higher rate of interest on savings account (Due to Competition), they may pass on this burden to Loan Customers. Customers who borrow money from banks will have to bear this extra charges in order for the bank to retain its profitability.

Have Banks Revised their Rate of Interest on Savings Accounts Already?

Yes. Not many banks have done it so far, but some of the Private Banks have done so already.

1. YES Bank - 6% for all Savings Accounts
2. Indus Ind Bank - 5.5% for Savings Accounts with balance of less than 1 Lakh and 6% for Savings Accounts with balance of greater than 1 Lakh
3. Kotak Mahindra Bank - 5.5% for Savings Accounts with balance of less than 1 Lakh and 6% for Savings Accounts with balance of greater than 1 Lakh

More Banks are expected to follow suit.

Is it a Good Idea to shift banks right away?

Well, I wouldnt suggest that. We should wait for a few more months to see what rate of interest the bank we hold a Savings Account with is offering before taking the shift decision. However, if you want to open a new Savings account and have any of the higher interest paying banks near your home or office, it would be a good idea to choose them instead of the other banks.

Will Nationalized Banks offer such attractive Savings Account Interest Rates?

Well, this is something that only time can tell. Some Reasons why they may delay the rate hike or not give such an attractive Savings Account rate of interest could be:

1. In most Nationalized Banks, a bulk of the customers with Savings Accounts are "Pensioners" and "Senior Citizens". They can receive their pension only with Nationalized Banks and hence cannot shift to private banks.
2. They do not have aggressive targets to attract customers because the uncle who writes their pay-check is the Government of India and hence their policies are not usually Customer Friendly.

However, to keep their market share with the younger population who dont receive their Pension, they would eventually have to hike their rates. Otherwise, customers will move on to Private Banks that offer a much higher interest rather than being stuck with Nationalized Banks.

Happy Saving!!!

Good News for Savings Account Holders

We all hold savings bank accounts with different banks in India and we also know that the rate of interest that we earn on this money is a pathetic 3.5% per annum. This is very low considering the fact that our nations inflation is hovering around the 10% mark. There is some good news for all savings account holders because with effect from April 1st 2010, there is a small change in the way the interest accrued on our bank account is calculated.

Earlier Method: The minimum balance maintained in the account between the 10th and the last day of the month (say 30th or 31st) will be taken for the interest computation

New Method: The balance at the end of every day will be taken into account for interest computation.

Let us check this with a real time example:

Mr. X get his salary of Rs. 50,000/- on the 1st – Balance in Account Rs. 50,000/-
Withdraws Rs. 20,000/- for family expenditure on 8th – Balance in Acc Rs. 30,000/-
EMI on Personal loan Rs. 15,000/- deducted on 15th – Balance in Acc Rs. 15,000/-
Withdrawal of Rs. 10,000/- to meet sudden expenses on 25th – Balance in Acc Rs. 5,000/-

Now let us compute the Interest earned in the account by both ways.

As per the Earlier Method:

Amount considered for interest computation = Rs. 5,000/-

Interest earned for the month = Rs. 14.58/-

As per the New Method:

Balance considered for Interest for 7 days = Rs. 50,000/-
Balance considered for Interest for the next 7 days = Rs. 30,000/-
Balance considered for Interest for the next 10 days = Rs. 15,000/-
Balance considered for the last 6 days = Rs. 5,000/-

Total No. of days in the month = 30 days

Interest for first 7 days (Rs. 50,000/-) = Rs. 34.02/-
Interest for next 7 days (Rs. 30,000/-) = Rs. 20.41/-
Interest for next 10 days (Rs. 15,000/-) = Rs. 14.58/-
Interest for the last 6 days (Rs. 5,000/-) = Rs. 2.92/-

Total Interest Earned for the month = Rs. 71.93/-

This is nearly 5 times as that of the interest earned by the old method.

What is the Impact on us?

1. People who need cash for short term liquidity can retain the money in their bank accounts instead of transferring them to short term Fixed Deposits like 30 or 60 days because the interest on your savings account will be atleast as much as the FD and most importantly it is much more liquid and there are no penalties on withdrawal
2. People who had maintained a solid balance till the 25th or 26th of the month and had to withdraw money for some urgent reason need not lose out on the interest for those 25 or 26 days. Every ten thousand rupees in your savings account earns an interest of one rupee for every day that it is kept in your account.

Happy Investing!!!!!