SBI lowers FD rates to 6.9%; Debt mutual funds steal the spotlight with over 118 outperformers

State Bank of India ( SBI), India’s largest public sector bank, has revised its Fixed Deposit (FD) interest rates, to 6.9% from 7%, effective April 15, 2025, as per its official website. The bank has reduced rates by 10 basis points on select medium-term deposits, particularly those with tenures ranging from 1 to 3 years.

FDs with maturities between 2 years and less than 3 years will now earn 6.90% interest, down from the previous 7.00% which is still lower than what is offered by around 118 debt mutual funds during the same period.

ETMutualFunds analysed the performance of debt mutual funds in three years and found that these funds offered annualised returns ranging between 7% to 14.3%, higher than 6.9% being offered by SBI FD.

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SBI FD interest rates


For a tenure of one year to less than 2 years, the interest rate has been revised to 7.20% from 7.30%. In two years to less than 3 years, the revised interest rate offered is 7.40% against 7.50% earlier.

FD-beating debt mutual funds


Four debt mutual funds gave double-digit returns in the last three years. Aditya Birla SL Medium Term Plan gave the highest return of 14.3% in the last three years, followed by two credit risk funds.

DSP Credit Risk Fund and Aditya Birla SL Credit Risk Fund gave 13.9% and 10.6% respectively in the said time period. UTI Medium to Long Duration Fund gave a return of 10.1% in the same time period.

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SBI Magnum Gilt Fund gave a return of 8.6% in the mentioned period. Two constant maturity funds - ICICI Pru Constant Maturity Gilt Fund and SBI Magnum Constant Maturity Fund - gave 8.5% each in the last three years.

Two government security based funds from DSP Mutual Fund - DSP Gilt Fund and DSP 10Y G-Sec Fund - gave 8.3% each in the said time period.

SBI Magnum Income Fund and SBI Credit Risk Fund delivered a return of 7.6% each in the last three years. Nippon India Income Fund and Nippon India Credit Risk Fund gave 7.5% return each in the similar time frame.

Baroda BNP Paribas Ultra Short Duration Fund and Sundaram Money Market Fund gave 7% return each in the said period.

Underperformers


Around 170 debt mutual funds have failed to beat the fixed deposit interest rate offered by SBI. These funds gave returns ranging between 5.4% to 6.9% in the said time period.

Sundaram Short Duration Fund gave 6.9% and Franklin India ST Income Plan gave the lowest return of 5.4% in the mentioned time period.

FD vs debt funds


Now coming to the comparison between fixed deposits and debt mutual funds, fixed deposits are considered low risk investments as they offer a guaranteed return for the predetermined period whereas debt mutual funds have a slightly higher risk associated with them because of the interest rate movement.

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The second point of difference comes on the taxation part. The investment in tax-saving fixed deposits is exempted under Section 80 C of the Income Tax Act whereas for the debt mutual funds there is no such exemption. But both fixed deposits and debt mutual funds are classified under the same asset class.

We considered all debt categories such as gilt fund, long duration, medium to long duration, gilt fund - constant maturity 10 year, credit risk funds, liquid funds, money market funds, overnight funds, corporate bond fund, dynamic bond fund, floating rate bond, banking and PSU funds, medium duration, low duration, short duration funds. We excluded debt based target maturity funds. We considered regular and growth options.

We calculated returns for three years. We calculated CAGR returns as in debt mutual funds, returns up to one year are annualised and above one year are CAGR.

Note, one should not make investment or redemption decisions based on the above exercise. One should always consider risk profile, investment horizon and goal before making investment decisions.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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