5-year post office time deposit (POTD) is offering higher rates than these top 5 banks

Bank fixed deposits and post office time deposits (POTD) are comparable investment options. A post office term deposit’s investment is completely guaranteed by the government and has guaranteed returns. The interest rate on post office time deposits (POTD) for the July–September quarter of 2024 is 7.5% with a five-year duration. It should be noted that, in contrast to many banks, senior citizens are not given higher rates under the POTD system.

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The funds in bank fixed deposits are guaranteed up to Rs 5 lakh by the Deposit Insurance and Credit Guarantee Corporation (DGIC). The minimum investment vary with banks. Interest rate also differ depending on the bank.

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Banks such as HDFC Bank, ICICI Bank, Axis Bank, and IDFC First Bank offer an interest rate of 7 per cent on deposits maturing in five years. IndusInd Bank offers an interest rate of 7.25 per cent on FDs maturing in five years. SBI offers an interest rate of 6.5 per cent for fixed deposits maturing in five years.

Canara Bank offers 6.70% on five year fixed deposit for general citizens. As you can see, you get a relatively higher interest if you invest in five-year post office term deposits than in five-year FDs in most public and private banks.

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If a deposit in a five-year account is withdrawn prematurely after four years, interest at the Post Office Savings Account rate of 4% will be paid now. Previously, if a five-year time deposit account is closed after four years from the date of deposit, interest will be calculated using the rate applicable to three-year time deposit accounts.

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Banks often levy a fixed deposit early withdrawal penalty of 0.50% to 1%, depending on the bank. Banks may also waive penalties for deposits kept for a minimum period of time.

Time deposits are of two types: callable and non-callable. Callable FDs are FDs with premature withdrawal facility. In non-callable deposits, the bank can levies up to 0.5- 2% as the penalty charge for premature withdrawal of the deposit.

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