Fixed Deposit (FD) is a great option for investors who prefer to stay away from risky investments like stocks and crypto, as these involve market risk and their prices fluctuate frequently. In contrast, FD is a bank-backed instrument, which gives you a fixed interest rate. Once you invest your money, there is no chance that your FD interest rate will go down, even if the market conditions are not very good.
Banks keep changing their FD rates from time to time according to the interest rates of RBI and the condition of the general economy. FDs are divided into different tenures, and FD rates vary depending on the tenure. Although all banks have their own fixed deposits, small finance banks often offer much better interest rates on FDs to their customers. Before investing in Fixed Deposit (FD), experts advise you to compare the interest rates of different banks.
Fresh FD rates of India’s top 5 small finance banks
Small finance banks, including Jana Small Finance Bank, AU Small Finance Bank and Suryoday Small Finance Bank, offer interest rates as high as 8.10 percent on their fixed deposits. Here are the best FD interest rates from the 5 most famous small finance banks in India.
| bank name | Tenure | FD interest rate (%) |
| Jana Small Finance Bank | >1 year to 3 years | 7.50 |
| AU Small Finance Bank | 30 months 1 day to 36 months | 7.10 |
| Utkarsh Small Finance Bank | 2 years to 3 years | 7.50 |
| Sarvodaya Small Finance Bank | 30 months | 8.10 |
| Ujjivan Small Finance Bank | 24 months | 7.55 |
Benefits of investing in FD of small finance banks
Although investing in fixed deposits has many big advantages, but FDs of small finance banks also have some special advantages of their own. Small finance banks have a special banking license, the purpose of which is to provide banking facilities only to those people who are less able to get these facilities. For this reason, when it comes to investing in FD, these banks often become the first choice among some depositors.
Most small finance banks offer higher interest rates than traditional banks. They generally offer 1-2% higher interest rates than normal commercial banks. Although this difference may seem small in isolation, but due to the compounding interest on FD, it turns into a huge amount over the years.
DICGC, which is a part of the RBI and covers all bank deposits up to Rs 5 lakh, also applies to deposits made in small finance banks. This helps in reducing the risk and depositors can invest up to Rs 5 lakh without any worries.
Although the interest received on FD is taxable under the Income Tax Act, 1961, you can still save on your tax expenses. Tax-Saving Fixed Deposits offer the benefit of tax deduction up to Rs 1.5 lakh under Section 80C of the Income Tax Act.
Like other FDs, Fixed Deposits from small finance banks also offer a risk-free investment option as their interest rates are not linked to the market fluctuations that investors may have to face.