Fixed deposit rates in flux: HDFC lowers rates again, ICICI leads vs SBI and HDFC

The competition among major Indian banks regarding fixed deposit (FD) interest rates has intensified following the Reserve Bank of India's (RBI) recent decision to cut the key repo rate by 50 basis points. HDFC Bank has recently reduced interest rates on select fixed deposit (FD) durations by 25 basis points (bps), effective June 25. These revised rates are applicable to deposits below Rs 3 crore. This adjustment marks the second decrease in FD rates made by the bank this month, following a similar adjustment on June 10. Furthermore, the bank has implemented a 25 bps reduction in savings account interest rates, bringing the rate from 2.75% to 2.50%, effective from June 24.

Fixed deposits are a widely used savings tool that provides a fixed return over a specified period. With the most recent changes, HDFC Bank now offers FD rates ranging from 2.75% to 6.60% for regular customers, depending on the duration. Senior citizens are entitled to slightly higher returns, earning between 3.25% and 7.10%.

For instance, FDs with a duration of 18 months to less than 21 months currently offer 6.60% for general customers and 7.10% for senior citizens.

FD rates of major banks

ICICI Bank is currently leading this race, offering superior FD interest rates compared to State Bank of India (SBI) and HDFC Bank, especially in the mid to long-term deposit categories. This adjustment by the RBI has prompted banks to revise their FD rates, aiming to attract depositors seeking stable returns amidst a changing economic environment. The revised rates reflect a strategic move by banks to balance customer attraction with financial sustainability. 

In the revised rate offerings, ICICI Bank emerges as the leader with attractive interest rates across various tenures. For short-term deposits up to six months, SBI offers the highest rate at 5.80%, slightly edging out HDFC and ICICI, both of which offer up to 5.75%. However, for tenures ranging from 18 months to 2 years, ICICI offers a competitive 6.50%, surpassing its competitors. For longer tenures of 2 to 10 years, ICICI again leads with 6.60%, compared to HDFC's 6.40% and SBI's 6.30%. These strategic rates by ICICI aim to capture a larger share of the depositor market, catering to those seeking long-term growth and financial security. 

Senior citizens benefit from preferential rates across all three banks, with ICICI and HDFC both offering up to 7.10% for select tenures, while SBI provides a slightly lower peak at 7.05% under its 'We Care' scheme. This trend of offering higher returns to senior citizens reflects a broader strategy by banks to secure investments from this demographic, who typically favour stable and secure financial options. ICICI Bank's competitive positioning in this segment underscores its strategy to enhance its depositor base during times of economic adjustment, ensuring it remains a preferred choice for senior investors. 

In this competitive landscape, ICICI Bank, HDFC Bank, and SBI stand out as key players. While HDFC matches ICICI's long-term deposit rates at 6.60% for tenures over five years, it lags in shorter durations. Conversely, SBI remains strong in very short-term deposits but falls behind in mid to long-term offerings. This dynamic competition highlights the continuous evolution of strategies by these banking giants to adapt to regulatory changes and market conditions, aiming to meet the diverse needs of their customers through tailored financial products. The strategic maneuvers by these banks are indicative of their commitment to maintaining a robust and appealing portfolio for their clientele.