HDFC Bank hikes FD interest rate by 40 bps on this tenure

The hike in repo rates has forced banks and NBFCs to raise their deposit rates. Five-year fixed deposits in some banks now offer 7-7.5% interest, up from 5.5% about a year ago, according to a recent ET Wealth news report.

Here is a look at the FD interest rates of three of the country's biggest banks.

With effect from August 13, 2022, the bank has hiked the interest rate for FD tenure of 180 days to 210 days to 4.55 percent. For tenure 1 year to less than 2 year, interest rate has been hiked to 5.45 percent from 5.30 percent. SBI has hiked the interest rate of 2 years to less than 3 year tenure to 5.50 percent. For 3 years to less than 5 years, the rate has been hiked to 5.60%. For the 5 year and up to 10 year tenure, the bank will now offer 5.65 percent. SBI offers interest rates between 3.40 percent to 6.45 percent for senior citizens for tenure ranging between 7 days to 10 years.

According to the HDFC Bank website, effective from August 18, 2022, one year to two years tenure will now earn 5.50 percent from 5.35 percent, an increase of 15 basis points. Tenure of two years, one day to three years will continue to earn 5.50 percent. The bank has hiked interest rate by 40 bps on tenure between three-year one day to five years to 6.10 percent from 5.70 percent earlier.

According to the bank website, effective from June 22, 2022, term deposits with a maturity of 185 to less than one year now pay 4.65 percent from earlier 4.60, an increase of 5 basis points, while those with a maturity of one year to two years will fetch 5.35 percent interest from 5.30 percent. ICICI Bank will now offer a 5.50 percent interest rate on two-year and one-day to three-year fixed deposits, and a 5.70 percent interest rate on three-year, one-day to five-year fixed deposits. For tenor five years one day to ten years, the interest rate offered is 5.75 percent.

Before you lock in your money in a fixed deposit, keep in mind that the repo rate might be hiked further. "Investors should therefore go for short-term deposits of 12-15 months instead of locking in for the long term. More importantly, assess the fundamentals of the institution before you invest. If investing in a bank deposit, make sure the bank has a sound backing. Some banks, especially cooperative banks, offer very high interest but may not be able to repay your money," stated the ET Wealth news report.

If you are looking to book an FD for the long term or a big FD is due for renewal, this may not be the right time to do so. In a growing rate scenario, it is better to book FDs with short tenure so that it can benefit from the hike during the investment period. So, booking an FD with a tenure of 6 months to one year could be a better strategy. Once these FDs mature and you get a better rate at the time of renewal you can book longer term FDs.