The evolving economic catastrophe has affected almost every country in the world and India is not an exception. Stock market plunging, prices increasing, inflation, we are hearing this news every day. According to studies, the Indian stock market is one of the worst performing indices in the year 2012. Right now the market is on the negative return track. Individual stocks may have paid out well-but as a whole, investing in stocks is no longer a good notion and is more of a risky in the current scenario.

I personally am a victim of the so called ULIP plans. According to latest NAV rate, the total fund value of my investment is less than what I have paid. Not surprising-since its a market linked product ups and downs are normal. However, not everyone can afford such losses if they have some short term plans in mind. So the question is-do we have a better option, a good investment plan that yields more return for our hard-earned money? Well, for a middle-class family in India, the best choices left are Gold, fixed deposit and systematic mutual fund investing. We will do a comparison of Gold, Mutual fund SIP in our upcoming posts. Now let’s compare the Fixed deposit schemes in India to find out the best one.

RBI is frequently updating the repo/reverse repo rates to restraint inflation and the sky rocketing food prices. However, these measures haven’t changed the situation yet-instead it incited the banks to vary base rate and the lending rates. The base rate is determined after considering many factors, and the bank’s cost of deposits is one key element of it. When the inflation continues at higher rates and when the credit rates are stepped up, value of money or purchasing power of the people, those who have already invested in fixed deposits reduce. Obviously, the banks will have to increase the FD interest rates to continue receiving funds from public. In this projection, the fixed deposit schemes in India turn out to be more valuable than the traditional post office saving account, and secure than equity investment and mutual funds.

Best fixed deposit in India 2012:

Bank                                     90 days   6 month   1 year    3 years    5 years   Tax Saver

Co-Operative Bank                  8.50      9.25       10.00        10.25      10.50      10.50
Tamilnad Mercantile               7.00       8.50        10.25          9.75      10.00      10.00
Karnataka Bank                      5.00       8.50        9.75          9.50        9.50       9.50
City Union bank                      6.00       6.50       10.00           9.75       9.75       9.50
IDBI Bank                              7.00       9.00          9.50          9.50       9.50       9.50
Karur Vysya bank                   7.65       7.65        10.00          9.75        9.50      9.00
SB of Travancore                    7.00       8.75          9.50          9.50       9.50       9.50
South Indian Bank                  4.50       7.00          9.75          9.25       9.50       9.25
Oriental bank                         5.75        9.00         9.60           9.25       9.25      9.50
Punjab & Sind                        7.25        9.00         9.60           9.50       9.25      9.05

*(As of  1 January 2012)

This article is about the best fixed deposit interest rate. You can compare it with the offerings of other Indian banks (SBI, ICICI, HDFC, AXIS, Union, etc.) here. All finance houses promise .25% to .50% extra return for senior citizens opting for long-term plans. The tax saver  scheme permits a maximum deposit of 1L  with income tax benefits under section 80C. They ensure higher returns but premature closure or overdraft is not allowed in any extent. Another thing to note is the high interest rate that some banks provide on 300-600 day deposits. A few good examples are given below with interest rates in the bracket.

Kotak Bank-700 D (9.50), Catholic Syrian Bank-15 months (10.10), South Indian Bank-300 days(10), Yes Bank-480 D (9.60), Dhanalakshmi bank 300D (10.00) 500D (9.75), State Bank of Mysore-500D(9.75), SBT-5o0 days (10.00), SBP-555D(9.75), Federal Bank-500days (10.00), Syndicate bank-364D (9.75).

It is perceptible from the table that the best fixed deposit rate in India is offered by Kerala State Co-Operative bank. So if you deposit 5L in KSCOB for five years, the final amount will be around 8.40L leaving out the future interest revisions. The same amount when invested in HDFC bank yields only 7. 5L. Nevertheless, rates should not be the underline for selecting your banking partner-the service, areas served, customer support, etc. is too important. When these factors are satisfactory, an above nine interest rates can be treated as a good fixed deposit scheme.


  1. I’m thinking of putting money in Punjab-Sindh’s 500 days FD ( 9.75% rate).
    One concern is how they calculate interest rate? is it quarterly or something else? want to calculate cumulative rate.

    Want to do some homework before going to bank.
    Thanks in advance.


    Dear sir ,

  3. Manic…fixed deposits pay any time better than savings ac …u also have the option to take your money before maturity on just the sake of 1%…it means if u get 9% on fd..u get 8% on premature exit …n its better than savings ac 5-6%

  4. What’s your opinion? Which would be the best choice in 2012? Fixed deposit or Savings account. I heard that some banks have increased savings account interest rates.

  5. any way what is the best option 4 ordinary middle class people? guys

  6. Admin

    As you might know, in a non-cumulative fixed deposit plan, you get the interest quarterly and in a cumulative fixed deposit, you get the principal and total interest at the end of the term. Since the interest is compounded quarterly the total yield from a cumulative fixed deposit comes around 11% at the end of the term. So choose a fixed deposit plan according to your needs. If you want returns in every quarter go for non-cumulative one.

  7. hi,
    can you let me know diffrence of below two interest rate calculation

    the kalyan janata nagrik bank in kalyan offer two secheme on 1st september

    1. 11% for 15 Month Non-Cumlative in quartely
    2. 10.50% for 15 Month Cumlative in quarterly

    which is the best option .?

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