Why are some smaller banks offering higher interest rates for fixed deposits? Is it a scam?


Why are some smaller banks offering higher interest rates for fixed deposits? Is it a scam?


No it is not a scam as each bank has its own financial outlook and a different fixed deposit interest rate offer for potential depositors. Smaller banks or lesser known banks usually often a slightly higher interest rate compared to the well known banks. This is because such lesser known banks usually witness a lower number of potential depositors in their banks. Since raising money from the money market turns out to be far more expensive for such banks, they attract depositors with a higher interest rate on fixed deposits.


Hi Preetha,

Small finance banks usually offer higher interest rate in a bid to attract more customers. This is not a scam. Here are some small banks that provide higher interest rate.

  1. ESAF Small Finance Bank
    ESAF Small Finance Bank is an NBFC that has presence in rural, semi-urban and urban areas. The small finance bank offers the best interest rates in the industry, and other benefits.
    o They offer more than 9.50% interest p.a. on senior citizens FDs for 1 year
    o ESAF offers the highest rate of interest of 9% for regular individuals
    o All deposits have to be less than Rs.1 crore
    o The bank offers regular, flexi and group-based schemes

  2. KTDC
    KTDC is an undertaking by the Kerala government. At present, it offers the best FD rates in 2018 for 1 year term deposit schemes.
    o An interest rate of 8.25% is paid for regular individuals and 8.50% p.a. for senior citizens.
    o The minimum investment amount is Rs.10,000
    o They offer Periodic Interest Payment Schemes (PIPS) and Money Multiplier Schemes (MMS)
    o The minimum tenure is 1 year, while maximum tenure is 5 years

  3. Fincare Small Finance Bank
    Fincare Small Finance Bank offers a wide range of term deposit schemes and flexible tenure options.
    o The interest rate offered for 1 year deposits is 8.00% p.a. for individuals and 8.50% for those above 60 years of age
    o The bank offers Smart Fixed Deposits and Priority Plus Fixed Deposit schemes
    o Interest is paid on a monthly, quarterly basis based on the discretion of the customer
    o Attractive and competitive interest rates

  4. Utkarsh Small Finance Bank
    Utkarsh Small Finance Bank FD schemes come with a wide range of features and benefits. This is one of the highest interest paying term deposit options.
    o Interest is payable at 8% p.a. on all deposits of less than Rs.1 crore, held for this tenure
    o For senior citizens the interest rate offered is 8.50%
    o Minimum investment amount Rs.1,000, no maximum limit
    o 1% fee levied in case of premature withdrawal

Looking for a Fixed Deposit? Click here.

BB Expert


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