India’s most prominent Bank, the State Bank of India (SBI) on December 27th, 2023 raised interest rates on Fixed Deposits by up to 0.50% or 50 basis points. This can be seen as a major change in FD rates in the last ten months and applies to deposits below Rs. 2 Crores. The rate adjustments cover various time frames except for certain durations like deposits maturing within one to less than two years, two to less than three years, and five to ten years.
Why FD Is the most popular investment option among investors?
Fixed Deposits offer multi-faceted benefits to its investors, which are very hard to overlook and are stated below:
1. Guaranteed Returns – Fixed Deposits provide a steady interest rate throughout a set duration, ensuring a guaranteed ROI (Return on Investment). This reliability appeals to investors aiming for stability and a dependable income stream.
2. Liquidity – Fixed Deposits typically have a lock-in period for a specified duration, when the investor can’t take out the deposited funds. However, banks provide the option for early withdrawal with certain penalties or decreased interest rates. This feature offers a level of flexibility during emergencies compared to certain other extended investment options.
3. Secure and Reliable – FDs are considered the safest option for investment by retail investors as it is mainly offered by Banking institutions. The principal amount is safeguarded, establishing it as a low-risk choice in contrast to alternative investment avenues.
4. Availability of different tenures – Fixed Deposits offer a range of tenure choices, enabling investors to select a timeframe aligning with their financial objectives, be it short or long-term.
5. Steady Income – Individual investors or those who are retired from their respective jobs, look for investment options that can provide them with a steady income stream, and FDs offer the possibility of periodic interest payments, establishing them as a preferred option for generating a stable income.
6. Benefit in Tax – FDs offer tax benefits to their investors through certain provisions. However, the interest amount earned from Fixed Deposits might be applicable for tax deductions within specified limits according to particular tax statutes. Although it is highly advisable to consult the Tax Authorities to understand tax benefits better.
Latest FD Rates by SBI
| Duration | ROI for Non-Senior Citizens | ROI for Senior Citizens |
| 7 days to 45 days | 3.50% | 4.00% |
| 46 days to 179 days | 4.75% | 5.25% |
| 180 days to 210 days | 5.75% | 6.25% |
| 211 days to less than 1 year | 6.00% | 6.50% |
| 1 Year to less than 2 years | 6.80% | 7.30% |
| 2 years to less than 3 years | 7.00% | 7.50% |
| 3 years to less than 5 years | 6.75% | 7.25% |
| 5 years and up to 10 years | 6.50% | 7.50% |
SBI’s recent decision to increase its fixed deposit interest rates this December aligns with a trend observed among several banks, such as Bank of India, Federal Bank, Kotak Mahindra Bank, and DCB Bank, which have also elevated their rates during this period. This shift in interest rates comes following the decision by the RBI Governor Shaktikanta Das-led monetary policy committee (MPC) on December 8, 2023, to maintain the repo rate at 6.5% for the fifth consecutive time.
How to open a Fixed Deposit Account in a Bank?
If you are willing to open a FD Account, just simply follow these steps:
1. Selection of Bank – The very first step in order to open an FD Account is the selection of the Bank as per their interest rates offered, tenure, Government bank, Private Bank, reputation, etc.
2. Filling of Form – Secondly you need to fill out the form given by the Bank Representatives and complete it accurately including necessary information like personal details, tenure, deposit sum, and nominee details.
3. Submission of Documents – Provide the essential paperwork, including proof of identity (such as an Aadhar card, passport, PAN card, etc.), proof of address (like utility bills, Aadhar card, etc.), and a passport-sized photo.
4. Select FD and Tenure – Choose among the FDs that you wish to invest like a Standard FD or a Tax–Saving FD and also decide the tenure for which you intend to invest your funds.
5. Deposit the Amount – Deposit the desired Principal amount into your FD Bank Account through cheque, cash, or via online transfer.
6. Receipt of FD – After the deposition of money, the Bank will provide an FD receipt or certificate containing specifics such as the deposited amount, tenure, interest rate, and maturity date.
7. Monitor your FD – Lastly stay updated on your FD Account details like maturity date, and interest amount disbursement.
Final Thoughts
To sum up, the increase in Fixed Deposit (FD) interest rates by SBI in 2023 has attracted considerable attention from investors. While this move aligns with a larger trend in the banking industry, categorizing it as a transformative event necessitates a thorough examination of multiple elements. The interest rate hike might offer enhanced returns for investors, potentially influencing their investment decisions. However, the significance of this change as a game-changer depends on individual financial goals, prevailing market conditions, and the overall economic landscape.
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