Repo rate unchanged at 6.%: Full list of banks offering highest FD rates

The Reserve Bank of India (RBI) on Thursday kept the key repo rate unchanged yet again at 6.5 percent  in its June Monetary Policy Committee (MPC) meeting today, which means  this can still be a good time to lock your money in long-term fixed deposits  before banks start cutting deposit rates.

"The RBI has done an excellent job by taming inflation before it went out of control. Many Central Banks in foreign jurisdictions like the US and Europe failed in taming the inflation.  The prudent and regular hikes in the policy rates by the RBI took the domestic interest rates from 4 to 6.5 per cent in less than a year. The Consumer Price Index (CPI) and Wholesale Price Index (WPI) inflation; both are headed lower now; the former stood at an 18 -month low in April at 4.70 per cent, while the later dipped into the negative territory for the first time since July 2020," said Apurva Sheth, Head of market Perspectives & Research, SAMCO Securities.

Sheth believes this is an excellent opportunity for anyone who wants to lock-in funds in fixed income products like fixed deposits (FDs). Interest rates are likely to head lower once RBI starts cutting interest rates. This will have a positive impact on the bond prices which are inversely related to the interest rates. Long term Gilt funds can benefit from such a scenario," said Sheth. 

Also read: RBI policy 2023: A look at the existing repo rate, trends and other figures

There is a possibility that  banks may increase the fixed deposit rates a tad bit more to gather more deposits but chances are that  investors are close to peak FD rates and this is the right time to take advantage of the high fixed deposit rates.

" Predicting how inflation will behave in the coming months is essential for making informed decisions regarding FD interest rates. Based on our analysis, we expect inflation will fall in the near future. The fact that the Reserve Bank of India (RBI) did not raise interest rates in its most recent monetary policy review lends credence to this forecast.  Therefore, there appears to be no immediate need for interest rates to increase. In fact, if inflation remains under control, there is a chance that interest will begin to decrease. In light of this, individuals seeking higher interest rates would be wise to consider longer tenure options for their fixed deposits," said Sunil Damania, Chief Investment Officer, MarketsMojo.

While public sector banks are currently offering FD rates between 7 to 8 per cent, some small finance banks are offering over 9 per cent interest on FD to senior citizens as well as others. Following is a list of  public and private banks and the highest Fixed Deposit interest rates they are offering:

As seen in the table above, FD rates seem to be peaking in this cycle. Most banks are currently offering more than 7 per cent to depositors on select deposit tenors with a 25-75 bps premium to senior citizens. Whenever banks face liquidity challenges, the interest rates for deposits are likely to rise and when the liquidity challenges subside, fixed deposit rates may fall.

To determine whether liquidity challenges are subsiding for banks in India, several factors can be considered including – repo rate, interbank lending rates, deposit growth, credit growth, inflation, and overall economy of the country.

"We’re seeing inflation cool. We’re seeing the 10-year bond fall below 7 percent for the first time in a while. We’re also seeing interest rates on new loans being lower than rates on existing loans. Factors such as the return of Rs 2000 banknotes to the banks, and the pause on the repo rate point towards a flattening of interest rates. Once this happens, banks may start cutting their deposit rates in line with the broad costs of borrowing," said Adhil Shetty of BankBazaar.com.

Some of the rates being offered by banks for senior citizens ( All figures in percentage) 

If you are planning to invest in fixed deposits, this should be a good time to lock into these peaking rates as it would help lower your reinvestment risk, suggests Shetty.

When interest rates are high for FDs, it is sensible to opt for longer tenors whereas when interest rates are low, it makes sense to choose shorter tenors. It is also a good idea to ladder your FDs to earn higher interest during volatility in the interest rate.