Category Archive : Bank Deposits – Fixed, Saving, Recurring

Interest Rates of Recurring Deposit of Major Banks August 2018

In this article you will find the interest rates provided by major banks in India on the recurring deposit (RD) facility provided by them.

These interest rates are as on last updated by the respective websites.

Below are the interest rates offered by banks on RD’s for various durations:-

  • RD interest rates for tenure up to 2 years:-
Bank Name

6 Months

9 Months12 Months18 Months21 Months

24 Months

HDFC Bank

6.25%

6.75%7.25%7.25%7.25%

7.25%

ICICI Bank

6.00%

6.25%6.60%6.75%6.75%

6.75%

Axis Bank

6.00%

6.25%6.50%7.00%7.00%

7.00%

Kotak Mahindra Bank

7.25%7.25%7.25%

7.10%

IndusInd Bank

7.65%7.40%7.40%

7.25%

Yes Bank

6.70%

6.70%7.10%7.10%7.10%

7.10%

IDFC Bank

6.75%

7.00%7.25%7.25%7.25%

7.25%

State Bank of India

6.25%

6.40%6.90%6.70%6.70%

6.75%

Bank of Baroda

6.75%6.65%6.65%

6.65%

IDBI Bank

6.75%6.70%6.70%

6.70%

Central Bank Of India

6.50%

6.50%6.50%6.60%6.60%

6.60%

Indian Overseas Bank

5.50%

5.75%6.25%6.60%6.60%

6.60%

Citibank

6.25%7.00%6.00%

6.00%

Bandhan Bank

4.50%

6.80%7.00%7.30%7.30%

7.30%

DBS Bank

5.75%

6.10%7.00%7.00%7.00%

7.00%

  • RD interest rates for tenure from 2 years up to 10 years:-
Bank Name

27 Months

30 Months36 Months48 Months60 Months90 Months

120 Months

HDFC Bank

7.10%

7.10%7.10%7.10%7.10%6.00%

6.00%

ICICI Bank

7.00%

7.00%7.00%7.00%7.00%7.00%

7.00%

Axis Bank

7.00%

7.00%7.00%7.00%7.00%7.00%

7.00%

Kotak Mahindra Bank

7.10%

7.10%7.10%7.10%7.00%6.50%

6.50%

IndusInd Bank

7.25%

7.25%7.00%7.00%7.00%6.75%

6.75%

Yes Bank

7.10%

7.10%7.10%7.10%7.10%7.10%

7.10%

IDFC Bank

7.25%

7.25%7.25%7.20%7.20%7.20%

7.00%

State Bank of India

6.75%

6.75%6.80%6.80%6.85%6.85%

6.85%

Bank of Baroda

6.65%

6.65%6.65%6.65%6.65%6.40%

6.40%

IDBI Bank

6.70%

6.70%6.70%6.75%6.75%6.00%

6.00%

Central Bank Of India

6.50%

6.50%6.50%6.50%6.50%6.50%

6.50%

Indian Overseas Bank

6.75%

6.75%6.75%6.80%6.80%6.80%

6.80%

Citibank

Bandhan Bank

7.40%

7.40%7.40%7.40%7.40%6.40%

6.40%

DBS Bank

7.00%

7.50%7.00%7.00%7.50%

Notes:-

  • Kotak Mahindra Bank, IndusInd bank, Bank of Baroda, IDBI Bank and Citibank provide RD’s with minimum tenure of 1 year.
  • Citibank provides RD’s with maximum tenure of 2 years.
  • DBS Bank provides RD”s with maximum tenure of 5 years.
  • All the banks mentioned above offer 50% extra interest rates for senior citizens.
  • Only Bandhan Bank offers 0.75% extra interest rates for senior citizens. And Axis Bank provides variable higher interest rates for senior citizens.

Summary:-

  • Bandhan Bank provides the highest interest rates on RD’s for maximum tenures. Bandhan bank has recently got listed.
  • HDFC Bank, Kotak Mahindra Bank, IndusInd Bank, Yes Bank, DBS Bank and IDFC Bank also provide high and competitive interest rates on RD’, a little lower than Bandhan Bank.

Overview of Bank Fixed Deposit

The account which is opened for a particular fixed period (time) by depositing particular amount of money is known as Bank Fixed Deposit. Fixed Deposit, also called Term Deposit is an investment where the interest rate is guaranteed for a fixed term.

Fixed Deposits (FD’s) are investment instruments offered by banks. They are instruments where you can deposit money for a higher rate of interest than savings accounts. You can deposit a lump sum of money in fixed deposits for a specific period, ranging from 7 days to 10 years.

Once the money is invested with a reliable bank, it starts earning an interest based on the amount, period and from bank to bank. The term ‘fixed deposit’ means that the deposit is fixed and is repayable only after a specific period is over. The money cannot be withdrawn before maturity, but you may withdraw them after paying a penalty.

At the end of the duration of the deposit the amount that is originally deposited is returned to the depositor.

Bank Fixed Deposit Suitablility

  • For:-

Investors who are looking to invest a lump sum amount and earn assured returns o this investment. It is suitable for a person whose goals are 5 years away.

  • Not for:-

Investors who are looking for wealth creation over a long term should not invest in bank fixed deposit. The reason behind this is inflation. The returns from the FD would not be able to beat inflation over a longer period of duration. Bank fixed deposit is also not suitable for investors who want invest small amounts regularly.

Guaranteed Returns

Fixed deposits enable investors to earn higher interest on their extra funds. Returns on fixed deposits are guaranteed for the duration of the deposit. Also, there is no risk of loss of principal. Some banks also offer greater returns for senior citizens.

Bank fixed deposits are currently offering interest rates around 7%.

Given below are the Interest Rates on Fixed Deposits of Major Banks August 2018.

FB interest rates by banks

For knowing the average returns given by bank fixed deposits you can have a look at the chart provided in the next point.

Inflation Effect

Bank fixed deposits are not inflation protected. This means that when inflation is higher than the deposit interest rate, the deposit will not earn any real returns. Bank fixed deposits will only give a real rate of return when inflation is lower that deposit interest rate.

The chart below shows the comparison between inflation and average FD returns over the years.

Avg FD Returns & Inflation Rates.PNG

Liquid Investment

Bank fixed deposits are liquid but the liquidity is low. The bank fixed deposits have a lock-in period. But the deposits allow withdrawals with the payment of penalties for doing so.

FD withdrawal charges

Taxation on Bank Fixed Deposit

Bank fixed deposits are taxable. That is no deductions available. Only the deposits having maturity period of 5 years are eligible for deduction under section 80C. The interest earned from fixed deposits in both the cases is taxable. It is taken under the head income from other sources while calculating payable income tax.

From 1stJune, 2015 tax is deducted at source on the interest income above Rs. 10,000 at a rate of 10%. This limit has been increased to Rs. 50,000 for senior citizens.

Alternative Investment Options

If an investor doesn’t want to invest in bank fixed deposit, it has the following alternatives available, which have same characteristics:-

  • National Savings Certificate [NSC]
  • Post-Office Time Deposits
  • Company Deposits
  • Debt Mutual Funds
Overview of Bank Fixed Deposit

Types of Savings Bank Account

Savings Bank Accounts are the most basic financial product that is available these days. They are the primary business of banks.

Currently, savings bank accounts are offering interest rates around 3.5-4%.

Below is a chart showing the percentage population of India who has a bank account. It also shows the data on percentage of accounts opened by male and female.

Interest rate comparison

Following are some of the key types of savings bank accounts that are available:-

1] No Frills Account –

No-Frill account is only beneficial for low income individuals. A no-frills account is a bank account that can be opened and maintained with a zero balance. It levies zero or very low charges on minimum or average balance.

If the balance in a no-frills account exceeds Rs. 50,000 or if the cumulative value of credit transactions exceeds Rs. 1 lakh in any financial year, the account will no longer be treated as no frills account. No-Frills account does not provide facilities like unlimited transactions, free ATM, online banking, cheque book facility.

2] Salary Account –

A salary account is a type of savings bank account which can only be opened by a salaried individual. Many of the employers deposit their employee’s monthly salary and bonuses directly into this account.

This account has a few additional benefits. These benefits are zero balance feature (or concessions on maintaining minimum balance), cheque book facility and a higher interest rate on deposit amounts. Some banks also offer a free ATM cum debit card.

3] Sweep-in or Multiplier Account –

A sweep-in account also known by multiplier account comes with a higher yield compared to a normal savings account. If one chooses to go with a sweep-in account, any amount above a certain minimum balance in the savings account is automatically converted into a FD.  Sweep-in or Multiplier account offers combine benefits of both savings bank account and fixed deposit account.

The balance in this account is never idle. Fixed deposit(s) from the extra funds in the savings bank account, subject to a minimum balance as stipulated by the bank, are created in multiples of sums set by the bank for a tenure of one year or more. Here, banks link customer’s savings account with fixed deposit account. This facilitate automatic transfer of extra funds from saving account to fixed deposit account to make you earn high interests.

This account also provides maximum liquidity. All the linked fixed deposits are enabled for automatic reverse sweep in multiples as set by the particular bank on a last-in-first-out (LIFO) basis when the balance in the savings account falls below the specified minimum balance. This way the amount that is reversed earns interest rates applicable for the period that the deposit was held with the bank.

4] Miscellaneous Accounts –

  • Privilege banking –

Privilege banking account offers additional services for a fee or on maintaining a higher minimum balance. Privilege banking account customers enjoy more convenient banking experience. They also enjoy a broad set of products and services.

  • Children’s Account –

This type of savings bank account is for minors (children aged less than 18 years old). In case of such an account, children operate the account under the guidance of the parent or guardian of the minor. Conditions are already pre-set by the parent or guardian of the minor.

  • Account for Women –

As the name suggests, only women are eligible for this type of savings account. Some of the key benefits available in this account include special discounts, privilege cards, higher rates of interest on the account and many more.

  • Senior citizen Account –

Only individuals over 60 years of age are eligible for this type of savings account. And they can avail some key benefits that are not available in case of regular accounts. This account also offers special counters for service at the bank branch. These benefits may include a higher interest rate, a low or no minimum balance requirements and special offers on term deposits.

– Pradhan Mantri Jan Dhan Account –

Pradhan Mantri Jan Dhan Yojana (PMJDY), comes under Prime Minister’s Peoples’ Wealth Scheme. It is a government scheme. Pradhan Mantri Jan Dhan Yojana is national mission for financial inclusion to ensure access to financial services, like savings account, deposit account, credit, insurance, pension in an affordable manner. This scheme was launched in the year 2014.

The Pradhan Mantri Jan Dhan Account is a no-frills account. Its purpose is to provide banking access to all, especially to the poor. It can be opened in any bank with zero balance. But one cannot avail cheque book facility under this account. To get a cheque book, one has to maintain the average monthly balance.

Types of Savings Bank Account

6 Features of Savings Bank Account

The Savings Bank Account is generally opened in bank by salaried persons or by the persons who have a fixed regular income. This facility is also given to students, senior citizens, pensioners, and so on.

Savings bank accounts are opened to encourage the people to save money and collect their savings. The savings bank account holder is allowed to withdraw money from the account as and when required. The interest which is given on savings bank accounts is sometime attractive, but often nominal.

Savings bank account offers the following important features:-

1] No Age Restriction –

There is no age restriction for opening a savings bank account. Minors can also open an account with the natural guardian operating it. Minors above 10 years of age can operate the account on their own.

2] Easy Account Maintenance & Low Charges –

Maintaining a savings bank account is very easy. It is hassle free and the process of maintaining and using it is also not complex. Maintaining the records of transactions made from the account is very simple. Transaction records are maintained through passbooks, either a physical one or an e-passbook.

The minimum balance (average monthly balance) required to maintain in the account depends on account location, which could be urban, semi-urban or rural. Banks charge penalty if this amount goes below the minimum amount of balance to be maintained. Minimum amount varies bank to bank. Minimum balance required also depends on account type such as no-frills, savings, salary-linked, deposit-linked. A pre-defined number of transactions (or withdrawals) per month are free. After the number of free transactions is over, banks charge fees.

Example – Below you can see the various charges levied by SBI for account maintenance.

Account Related Charges of SBI

3] Good Interest Rates –

At present, the rate of interest ranges between 3.5% to 4% per annum for amount up to Rs. 1 lakh in India. The interest rates vary as per the amount of money deposited in the savings bank account. It is also subject to current trend of banking policies in a country. The interest is calculated on the daily-balance in the account.

Given below are Interest Rates of Savings Account of Major Banks August 2018.

Top Bank Interest Rates

4] No Account Tenure Restriction –

Savings bank account is of continuing nature. There is no maximum period of holding. The tenure of a savings bank account is as long as the account is active. There is no maximum duration for holding money in a savings bank account.

5] Nomination Facility Available

Savings bank account provides with nomination facility. Nomination is a facility that enables deposit account holders to nominate an individual, who can claim the proceeds of the deposit accounts or contents of the safe deposit lockers, post the death of the original depositors.

There can be only one nominee per account. But, different accounts can be nominated in favour of different individuals.

6] Easy Exit Option –

A person can close the account whenever he/she wishes to do so. He can close the account on any day within banking hours. There are no restrictions for closing your savings bank account. Also, exiting a savings bank account doe not attract any kind of charges or penalties.

Features of savings bank account

4 Benefits of Savings Bank Account

Introduction to Savings Bank Account:-

A savings bank account is the most basic type of account at a bank allowing you to deposit money, keep it safe, and withdraw money as needed. Savings bank accounts typically pay interest on your deposits, but interest rates are moderate on these accounts.

Savings bank accounts generally are opened to keep money that you don’t intend to use for daily or regular expenses.

You can make an unlimited number of cash withdrawals from your savings account at an ATM.

Banks may also charge fees unless you maintain a certain average monthly balance in the account.

Purpose of a Savings Bank Account:-

It’s wise to have a savings bank account. Without a savings account, where are you going to keep money that you don’t plan to spend in near future? It’s not safe to hold cash. Also, it’s tempting to spend money that you’ve got in-hand, so a savings bank account helps you set funds aside and reach your goals.

Broadly, the two big benefits of savings accounts are safety and growth. But there are also some other benefits of savings bank account. They are as follows:-

1] Guaranteed Interest Rates –

Up to 25th October 2011, the interest rates were fixed by the RBI and had to be same for the all the savings bank accounts across all banks. But after that RBI deregulated the interest rates on savings bank account. Thus, the banks were free to determine the interest rates on the capital in a savings bank account. In both the cases, interest rates for balance above Rs. 1 lakh varied.

You gain interest on your money over time with a savings bank account. That means you have more earning potential with your money in a savings bank account as compared to keeping it in a safe at home.

Currently, banks are offering interests at around 3.5-4% for balance up to Rs. 1 lakh.

Bank Interest Rates
Interest rate comparison

2] High Liquidity –

One of the primary benefits of savings account is its liquidity. Savings accounts offer easy access to your cash. This is also known as liquidity, or the ability to make a withdrawal quickly and easily. Once you’re ready to spend money, you can withdraw cash, make a payment by check, pay by debit card, or make an electronic funds transfer.

You can easily access your money deposited in your savings bank account in case of an emergency. Withdrawing money from a savings account is as easy as it can be. The savings account allows an easy access to your deposited money whenever required. You can withdraw your money as often as you like using an ATM. Savings bank account helps to use funds much easily when compared to taking money out of stocks, bonds or certificates of deposits, which results in penalties.

Post demonetization, the daily cash withdrawal amount from ATM’s has been increased from Rs.4,500 to Rs.10,000. Banks offer 3 to 5 number of free withdrawals beyond which they may charge some fees per withdrawal. The number of free withdrawals and the fees after exceeding the free withdrawal limit changes from bank to bank.

3] Taxation on Savings Bank Account

Interest from savings bank account is tax-deductible to a certain extent. But they are shown under income from other sources.

Under section 80TTA, for an individual or HUF, interest earned up to Rs 10,000 in a financial year is exempt from tax. The deduction is allowed on interest income earned from savings account with a bank, with a co-operative society or with a post office.

Interest that gets accumulated in your savings bank account above the amount of Rs. 10,000 must be declared in your tax return under the head income from other sources. This interest will be treated as income and taxed as per the applicable I-T tax slab rates. Also, no TDS is deducted on savings bank interest.

4] On the Move Banking –

One can access their bank account through their registered mobile-phone number with their bank. The features offered in mobile banking are of two types: first for account updates on mobile phones and secondly for doing money transfers and other services.

Most banks provide their account holders with an online access to their money 24 hours a day. Being able to access your funds when you need is one of the biggest benefits of a savings account. You can opt for an online transfer if you need to pay someone from your savings account and complete it in seconds online through NEFT, IMPS, UPI and RTGS facilities.

Banks also have mobile-banking interface. You can download the application of your bank and do different kinds of transactions on your mobile. You can also use net banking facility made available by the banks on their websites through laptops and PC’s.

Benefits of savings bank account

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