2 Large Private Banks Hike Fixed Deposits (FD) Interest Rates, Effective Now

Fixed deposits or FDs are again being more profitable after the RBI has raised its repo rate by 50 bps. By raising the key lending rate banks are offering better interest rates on FDs. Here, two private banks have been mentioned those have hiked their rates recently.

Kotak Mahindra Bank

Kotak Mahindra is a large private sector bank that has raised its rate by 10-15 bps on FDs for investors. The bank has increased the rates for FDs less than Rs. 2 crore, for FDs more than or equal to Rs. 2 crore and less than Rs. 5 crore, and for above Rs. 5 crore deposits. The new rates came into effect on June 10.

For 10 year FDs the new interest rate is 5.9% pa, for less than Rs. 2 crore deposit. For the FDs of 5 year to 7 year, the new FD rate is 5.9%, for any deposit of more than or equal to Rs. 2 crore and less than Rs. 5 crore. Now the 5 year to 7 year FDs, for deposits above or equal to Rs. 5 crore is attracting an interest rate of 5.85%, which is quite higher than the previous rate. In the last category tenor, the rate has been raised by 25bps.

HDFC Bank

HDFC is one of the most trusted private sector bank, operating in India. Taking a cue from the RBI's repo rate hike, HDFC has raised its FD interest rate for deposits below Rs. 2 crore, by 15-25 bps. The new rates came into effect on June 15. Additionally, the senior citizens continue attracting a 0.50% extra interest rate.

For the 6 months to less than 9 months FDs, the new interest is 4.65%, which was at 4.40% earlier, with a 25 bps rate hike. For the 9 months to less than 1 year FDs, the new rate is 4.65%, which was at 4.50% previously, with a 15 bps rate hike. For the 1 year to 2 years FDs, the new rate is 5.35%, which was at 5.10% earlier, with a 25 bps rate hike.

However, for the other FD tenors, the interest rate has remained the same.

FD interest rate comparison

Kotak Mahindra Bank

FD amount	FD tenor	New interest rate
Less than Rs. 2 crore deposit	10 years	5.90%
Above or equal to Rs. 2 crore & less than Rs. 5 crore	For 5 year to 7 year	5.90%
Above or equal to Rs. 5 crore	For 5 year to 7 year	5.85%

HDFC Bank

FD tenor	New interest rate	Previous interest rate
6 months to less than 9 months	4.65%	4.40%
9 months to less than 1 year	4.65%	4.50%
1 year to 2 years	5.35%	5.10%

Both of these two reputed private banks have raised interest rates on FDs, however, Kotak Mahindra has hiked the rates mostly for the deposits of much higher amounts and on long term FDs. On the other hand, HDFC has raised the rates mostly on the short term FDs, and comparatively for deposits of lesser amounts.

Long term FD or short term FD, where should you invest?

Understanding the importance of long term and short term FDs is very important for investors. Although the present repo rate hike has influenced the banks to offer more profitable, investors should remember that the interest rate on FDs is subject to change with time. This change mostly depends on the financial and economic condition coupled with the RBI repo rate hike. At present, to control the rising headline inflation, the RBI has raised its rate. But when the inflation will go under control, and the bank will think that the economy needs more liquidity infusion, it can reduce the repo rate. In that case, the interest rate on the FDs will go down. So, investors should not dip steps into long term FDs, according to some analysts. Additionally, higher deposit amount FDs can be a burden for investors. So, one should choose the FDs wisely, although it is an assured investment tool.