Highest 3-yr FD interest rate on Rs 5 lakh investment

For risk-averse investors looking for guaranteed returns, fixed deposits (FDs) remain the go-to investment option. Banks are on a spree to reduce the FD interest rate (after the Reserve Bank of India cut the repo rate). The government, on the other hand, has not reduced the interest rate on the small savings schemes, including the Post Office Time Deposit (POTD), yet. If you are looking to book fixed deposits at the highest interest rate, then which one is better in 2025? Here is a detailed comparison to help you make an informed decision.

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Current interest rate on Post Office 3-Year Time Deposit
Currently, Post Office 3-Year Time Deposit offers an interest rate of 7.10% per annum, compounded quarterly and paid annually. The current interest is valid till June 30, 2025. For the next quarter (July-September), the government will review the interest rate and can change it.

It is a government-backed scheme offering sovereign guarantee, making it one of the most secure investment opportunities available. Post Office Time Deposits provide peace of mind with guaranteed returns and no chance of default. However, the Post Office FD does not provide special rates for senior citizens, and the interest is paid annually. There is no option to get interest from the Post Office FD on a cumulative basis, i.e., at the time of maturity.

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Highest interest rate in 3-year banks FDs
In comparison, several private banks still offer higher interest rates on fixed deposits. DCB Bank, RBL Bank, and YES Bank lead the pack with 3-year FDs offering 7.50% per annum, followed by Bandhan Bank and IndusInd Bank at 7.25% per annum, and Canara Bank at 7.20% per annum. Bank of Baroda also slightly edges out with a 7.15% interest rate per annum.

On the other hand, many major banks, including Axis Bank, HDFC Bank, ICICI Bank, and Kotak Mahindra Bank, are offering 6.90% per annum on 3-year FDs for general citizens. This is 20 basis points lower than the interest rate offered by the Post Office FD. Several public sector banks such as SBI, Union Bank, PNB, and Indian Bank also offer between 6.25% and 6.75% to the general public. This makes the Post Office FD more attractive in comparison. While the difference in returns may seem marginal over three years, the Post Office's government backing provides an additional layer of safety, especially for conservative investors.

Current FD rates for 3-year FDs for general public
Source: Paisabazaar as on April 30, 2025

How much will you earn if you invest Rs 5 lakh now?
If you invest Rs 5 lakh in the Post Office FD at 7.10% per annum (compounded quarterly), the maturity amount after 3 years will be approximately Rs 6,17,538. This gives you total interest earnings of Rs 1,17,538 over the period.

Now, if you invest the same amount in banks offering lower rates, such as SBI, HDFC, ICICI, Axis, or Kotak-all offering around 6.90%, the maturity amount would be about Rs 6,14,598, resulting in Rs 1,14,598 interest. That's nearly Rs 2,940 less than the Post Office FD.

On the other hand, banks offering higher interest rates, such as DCB, RBL, and YES Bank at 7.50%, would give you a maturity value of approximately Rs 6,24,487, or Rs 6,949 more than the Post Office FD. Similarly, Canara Bank at 7.20% would give around Rs 6,19,911, slightly higher than the Post Office return.

In summary, if you invest Rs 5 lakh:
Post Office FD (7.10%): Rs 6,17,538
Most large banks (6.90%): Rs 6,14,598
Top private banks (7.50%): Rs 6,24,487