For many conservative investors, the perceived stability of Public Sector Undertaking (PSU) banks makes their fixed deposits (FDs) an attractive, albeit lower-yielding, investment option. However, current data reveals that top FD rates from major PSU banks remain below 7% for regular customers, often lagging behind those offered by private and small finance banks.
Comparing Top PSU Bank FD Rates
As of September 9, Bank of Baroda offers the highest maximum rate among the major PSU lenders reviewed, providing 6.75% for regular depositors on a 555-day tenure. Following closely, Bank of India offers up to 6.70% for a three-year deposit. Punjab National Bank (PNB) provides 6.60% for 444 days, matching Indian Overseas Bank (IOB) at the same tenure. State Bank of India (SBI) offers a maximum regular rate of 6.45% for 444 days.
One-Year FD Rates: Who Leads?
For those specifically looking at a one-year fixed deposit, Bank of India and Indian Overseas Bank offer the highest rates among these PSU lenders at 6.50%. Bank of Baroda, PNB, and SBI all offer 6.25% for one-year deposits.
To illustrate the difference, an investment of ₹5 lakh in a one-year FD at 6.50% would yield approximately ₹32,500 in simple annual interest, compared to ₹31,250 at 6.25%, before taxes.
PSU vs. Private & Small Finance Banks: A Wider Gap
The disparity in returns becomes more pronounced when comparing PSU banks with private and small finance banks. Several private banks offer higher maximum rates on select tenures, with IDFC First Bank at 7.10%, Bandhan Bank at 7.45%, and Yes Bank at 7.25%.
Small finance banks are considerably more aggressive in their offerings. Jana Small Finance Bank and Shivalik Small Finance Bank both offer up to 8%, while Suryoday Small Finance Bank leads with 8.25%. Other notable small finance banks include Utkarsh (8.10%), Unity (8%), and Ujjivan (7.80%).
Non-Banking Financial Companies (NBFCs) also present competitive rates, with Shriram Finance offering up to 7.50%, Mahindra Finance 7.45%, and Bajaj Finance 7.40% for regular depositors on specified tenures.
Higher Rates for Senior Citizens
Senior citizens generally receive additional interest across PSU lenders, narrowing the gap with other institutions. Among the five major PSU banks, Bank of India offers the highest maximum rate for seniors at 7.45%. Bank of Baroda follows at 7.25%, while PNB and Indian Overseas Bank both offer up to 7.10%. SBI provides a maximum of 7.05% for senior citizen FDs.
Investors prioritizing the perceived stability of public sector banks should carefully compare tenure-specific rates rather than solely focusing on the highest advertised number, as maximum rates often apply to particular maturity periods.