Up to 7.5% interest on fixed deposits: These 5 banks offer highest interest rates on 3-year FD

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Banks have increased their fixed deposit (FD) interest rates following the Reserve Bank of India’s (RBI) consecutive repo rate hikes since May 2022. RBI has raised the repo rate by a total of 190 basis points (bps) since May. Fixed deposits are among the most popular investment options for many, especially conservative investors. “The increase in FD interest rates is a welcome step for pensioners and senior citizens who rely significantly on such passive income,” said Ankit Jain, Partner, Ved Jain & Associates.

Several lenders are now offering more than 7 per cent interest rate on FDs. While retail inflation in the country was at a five-month high at 7.4 per cent in September 2022, over 7 per cent return on fixed deposits could be an attractive investment option for many Indians.

If you are planning to invest in a fixed deposit, here are the top five banks that offer the best interest rates on a three-year fixed deposit.

Bank Name3 Year (%)Quarterly Compound Return (%)
AU Small Finance Bank7.5012497.16
DCB Bank7.5012497.16
Bandhan Bank7.0012314.39
City Union Bank7.0012314.39
Karur Vysya Bank7.0012314.39

Source: Compiled by ETIG; interest rates as on November 10, 2022

DCB Bank offers a whopping 7.5 per cent interest rate for fixed deposits of three years. AU Small Finance bank also offers a 7.5 per cent interest rate on FDs maturing in three years. Bandhan Bank, City Union Bank, and Karur Vysya Bank offer an interest rate of 7 per cent on three-year fixed deposits. The interest rates are as on November 10, 2022.

Also read: Bajaj Finance offers 7.5% interest rate on this FD tenure: Check the latest FD rates

Best time to invest in fixed deposits
“As fixed deposit rates can be expected to continue to increase over the short-term,” said Gaurav Aggarwal – Senior Director, Paisabazaar.

FD interest rates to increase further

As banks have not passed on entire rate hikes to fixed deposit investors yet, the interest rate on FDs is likely to increase further in the coming months, say experts. “FD interest rates can be expected to increase as long as the RBI Monetary Policy Committee (MPC) continues to increase the repo rates. Factors like aggressive monetary policy announcements made by the major central banks and our domestic inflation rate still exceeding the MPC’s mandated inflation band should lead the MPC to opt for further repo rate hikes, which in turn should lead the banks to steadily increase their FD rates,” said Aggarwal.

Also Read: Central Bank of India hikes FD interest rates, revises savings account interest rate

Tips to make the most of a high fixed deposit interest rate regime
If investors want to make the most of the high FD interest regime, they should avoid the auto-renewal option on fixed deposits. Banks usually offer an auto-renewal option to customers investing in fixed deposits. If a customer exercises the auto-renewal option, the bank will automatically renew the fixed deposit for the same tenure with the current interest rate at the time of maturity. The current interest rate could be higher or lower than the previous interest rate of the fixed deposit.

“Investors should not opt for auto-renewal facility while booking or renewing their fixed deposits. This might allow the consumers to renew their fixed deposits at higher interest rates, after factoring in the highest interest rate slabs available at the time of renewal,” said Aggarwal.

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