2 Large Public Banks Increase FD Interest Rates On These Tenors, Effective Today: Check Rates

Fixed deposit is one of the most trusted and assured investment instruments. Mostly, senior citizens invest in FDs because for them the interest rates are higher than common people. However, recently the RBI has raised its key lending rate, the repo rate, hence most of the banks are also raising their interest rates on saving accounts and FDs. Here, two large public banks have been mentioned, these two banks have recently raised their interest rates on FDs.

Punjab National Bank (PNB)

Large public sector bank, the Punjab National Bank (PNB) has recently increased its fixed deposit (FD) interest rates on multiple tenors, which has been effective from June 14, 2022. The bank is now offering better interest rates, which will be profitable for investors. For PNB's account holders, for 2 years and up to 3 years FD interest rate for public is 5.30%, for more than 3 years and up to 5 years FD interest rate for public is 5.50%. This has been a hike of 25 bps. On the other hand, the bank's customers, for 5 years or more and up to 10 years FDs will get 5.60% rate. PNB did not change the rates for other FD tenors.

In May, the bank also hiked its interest rate for FDs, after the RBI raised repo rate.

State Bank of India (SBI)

The State Bank of India (SBI) is the largest public sector bank in India. Recently it has raised the interest rate on FDs, after the central bank raised the key lending rate. SBI has raised FD rates on some tenors by around 15 bps - 20 bps, for the investment of below Rs. 2 crore. These rates have also been effective from June 14, 2022. SBI informs that, for 211 days to less than 1 year FD interest rate for public is 4.60% (20 bps hike), for 1 year to less than 2 years FD interest rate for public is 5.30%, for 2 years to less than 3 years FD interest rate for public is 5.35% (15 bps hike).

Interest rate comparison

 

PNB's tenor	New interest rate
2 years and up to 3 years	5.30%
More than 3 years and up to 5 years	5.50%
5 years or more and up to 10 years	5.60%

 

SBI's tenor	New interest rate
211 days to less than 1 year	4.60%
1 year to less than 2 years	5.30%
2 years to less than 3 years	5.35%

These are the new interest rates offered by two large scale public banks, effective from today. However, PNB has initiated changes mostly on the long term FDs, while SBI has initiated changes on both short term and long term FDs.

Why should you invest in short term FDs?

The RBI has raised its repo rate on June 8, 2022, by 50 basis points at its MPC - monetary policy committee meeting. Earlier, in an off-cycle meeting, the central bank had also raised the repo rate, just a month ago. So, the bank has initiated a total of 90 bps rate hike in a very short period. To control the hiking inflation rate, the bank is also expected to raise the rate again in the next MPC, as analysts and economists are anticipating. So, eventually, this is a good time for investors who were looking forward for saving account and FD investments. These two are known as assured investment tools, however, offer lesser profit margins than equities or mutual funds or investments with risk quotients.

However, even if the investors are being interested in FDs now, but they should look for short term FDs. The interest rates are subject to change depending on the RBI repo rate. If the inflation stays under control and the RBI again reduces the repo rate, then the interest rate on FDs will fall. At that time, it will no longer be quite profitable. So, short term FDs are mostly recommended for investors.