Seeking Higher Returns on FD Investments? Top Banks with Optimal Interest Rates for Two-Year Deposits - Review Guide
Top Small Finance Banks Offer Competitive Fixed Deposit Rates
Small Finance Banks (SFBs) are gaining attention for offering higher interest rates on fixed deposits (FDs), with rates of around 7.75% to 8.40% per annum for two-year FDs for regular, non-senior citizen investors.
Jana Small Finance Bank leads the pack, offering an interest rate of 7.75% p.a. for FDs of more than 1 year up to 2 years, effective from July 25, 2025. Other SFBs like Suryoday, Utkarsh, Equitas, ESAF, and Ujjivan follow closely, offering rates slightly lower but still competitive. For instance, Suryoday offers the highest FD rate among SFBs at 8.15%, while Equitas, ESAF, Utkarsh, and Ujjivan offer rates of 7.60%.
Let's consider a Rs 1 lakh investment at 7.75% p.a., compounded annually over two years. The maturity amount would be approximately Rs 116,150. This means that a Rs 1 lakh FD at 7.75% p.a. would grow to approximately Rs 116,150 after two years.
It's important to note that while IDFC First Bank, though not an SFB but a private bank, offers somewhat lower rates on two-year deposits for regular investors, mainstream larger banks generally offer lower FD rates, usually between 6% and 7% for similar tenures.
However, investors should be mindful of the Deposit Insurance and Credit Guarantee Corporation (DICGC) insurance limit of Rs 5 lakh per bank. This means that if you have deposits exceeding Rs 5 lakh in one bank, you should consider spreading your investments across multiple banks to ensure full insurance coverage.
All SFBs are banked by the Reserve Bank of India (RBI) and focus on reaching underserved communities. It's advisable to check if the bank is RBI-registered, understand withdrawal rules, and consider tax on interest when investing in FDs.
For instance, a Rs 1 lakh investment in Equitas, Utkarsh, ESAF, AU, Ujjivan, or Jana Small Finance Bank's two-year FD would grow to approximately Rs 1.15 lakh, while a Rs 1 lakh investment in Suryoday Small Finance Bank's two-year FD would grow to Rs 1.16 lakh.
In conclusion, Small Finance Banks are offering competitive FD rates, making them an attractive option for investors seeking higher returns. However, it's essential to consider the DICGC insurance limit and other factors before making an investment decision.
Personal-finance managers may find Small Finance Banks (SFBs) appealing due to their competitive fixed deposit (FD) rates, with some offering as high as 8.40% per annum for two-year FDs. Furthermore, a Rs 1 lakh investment in SFBs, such as Jana Small Finance Bank, Suryoday, Utkarsh, Equitas, ESAF, or Ujjivan, could grow to over Rs 1.15 lakh or more, significantly surpassing the returns from mainstream larger banks or private banks like IDFC First Bank.
