FDs With Up To 9% Interest From Small Finance Banks. Should You Invest?

You can get up to 9% interest rate on the fixed deposit schemes offered by small finance banks. Know the pros and cons of investing in such deposits.

interest rate offered on the fixed deposit schemes offered by small finance banks
  • Small Finance Banks are RBI-governed banks that offer a variety of banking services.
  • The fixed deposits offered by such banks offer higher interest rates, going up to 9%.
  • From the return perspective, such FDs are quite beneficial but they have their drawbacks too.
  • You might not get inflation-adjusted returns and such banks are also riskier since they work with a limited capital base.


Fixed Deposit (FD) schemes offer guaranteed returns on investments which is why they are quite popular among investors.

Small Finance Banks (SFBs) offer lucrative interest rates on their FDs. So, should you invest in such schemes?

Are Small Finance Banks’ FDs worth investing in?

The high interest rate is not the only good thing about FDs offered by SFBs. There are other benefits too that you can get. However, there’s a flip side to such FDs also. So, you need to assess the pros and cons of investing in these FDs before making a choice.

Here’s a look at the merits and demerits of such FDs –

Benefits of investing in SFB FDs

  • You can get guaranteed returns.
  • Up to 9% returns make such FDs more attractive compared to bank FDs and even other small-saving schemes.
  • If you choose the 5-year FD scheme, you can also get tax benefits on the invested amount. Investments up to Rs.1.5 lakhs qualify as a deduction under Section 80C.
  • Senior citizens can earn higher interest rates. Moreover, the interest that they earn is also allowed as a tax-free income up to Rs.50,000 under Section 80TTB.
  • Since SFBs are RBI-regulated banks, their deposits enjoy the insurance coverage offered by the Deposit Insurance and Credit Guarantee Corporation (DICGC). FDs up to Rs.5 lakhs would be insured in case the bank defaults on the repayment.
  • You can choose from flexible tenure options starting from 7 days and going up to 10 years.
  • The minimum deposit amount is low while there’s no restriction on the maximum deposit amount.

Also Read - Read about the latest rate hikes on small savings schemes

Drawbacks of investing in SFB FDs

  • Returns are not inflation-adjusted.
  • SFBs operate on a limited capital base, hence the name. Thus, there’s a higher chance of repayment default.
  • Interest earned on the deposits is taxable for individuals below 60 years of age.

Top 5 FD Rates of Small Finance Banks in June 2023

Here's a look at the top 5 small finance banks' FD rates for June 2023 -

top 5 small finance banks' FD rates for June 2023

What should you do?

You can allocate a part of your portfolio to SFB FDs to bank on the high returns. But keep the flip side in mind. Limit your exposure to FDs and invest the remaining savings into market-linked avenues for higher return potential. Assess your financial needs and then make a suitable choice.

Also Read - Check out banks that offer 9.5% interest rates on their FDs. 

































Related Article

Premium Articles

Union Budget