Most people investing money in Fixed Deposit (FD) usually choose the traditional maturity period of 1 year, 3 years or 5 years. Very few investors are aware that banks often offer better interest than normal on 'special tenure' i.e. special periods. One such very popular and strategic tenure is 364 day FD (i.e. exactly 1 day less than 1 year).
This bucket has become very attractive for people looking for safe investments for short-term to medium-term. Let us understand where the highest returns are being earned on this tenure and how its mathematics works for investors of different ages.
Interest rates on maturity of 364 days are decided depending on the category of the bank. Generally, Small Finance Banks (SFBs) and some select private banks offer higher interest rates on this period ranging from 0.50% to 1.25% compared to big public sector banks.
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Small Finance Banks (SFBs): Suryoday Small Finance Bank, Unity Small Finance Bank, Utkarsh and Ujjivan Small Finance Bank lead in this category. Here general customers are getting annual interest from 7.75% to 8.25%, while senior citizens are getting annual interest from 8.25% to 8.75%.
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Major Private Banks: HDFC Bank, ICICI and Axis Bank are offering interest ranging from 6.70% to 7.10% to the general public and 7.20% to 7.60% to senior citizens for this period (just before 1 year bracket).
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Government Bank: Public sector banks like State Bank of India (SBI), Bank of Baroda and PNB offer returns around 6.50% to 6.80% to general customers and around 7.00% to 7.30% to senior citizens in the 364 days bracket.
In the Indian banking system, investors are divided into three different categories according to their age, where there is a direct difference in interest rates:
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General Citizen (below 60 years): They get the bank's base i.e. standard interest rate. The average rate for 364 days in small finance banks is 7.75% to 8.00%.
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Senior Citizen (60 to 80 years): Most banks offer normal rates to senior citizens. 0.50% (50 basis points) Pay additional premium of Rs. With this their returns increase from 8.25% to 8.50%.
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Super Senior Citizen (above 80 years): Many banks (like PNB, RBL and some small finance banks) run 'Super Senior Citizen' scheme for senior citizens above 80 years of age, in which the senior citizen rate is also Rs. 0.20% to 0.25% extra Interest is earned (i.e. a total of 0.75% to 0.80% more than the normal rate).
Example of potential earnings in 364 days on an investment of ₹5 lakh:
| Category | Estimated Interest Rate (in SFBs) | Total interest after 364 days | Total amount received on maturity |
| ordinary citizens | 8.00% | ~₹40,000 | ₹5,40,000 |
| senior citizen | 8.50% | ~₹42,500 | ₹5,42,500 |
| super senior citizen | 8.75% | ~₹43,750 | ₹5,43,750 |
(Note: Actual returns may vary slightly as per the bank's quarterly/monthly compounding cycle and day-based interest calculations.)
Banks use the 364-day period for their liquidity management and balancing asset-liability mismatch. Many regulatory and technical standards change as soon as 365 days (full 1 year) are reached, so banks often set aggressive interest rates on periods 1 day less (364 days) so that they can raise short-term capital within a year.
Its biggest advantage for investors is that their money is not locked for a long time. In less than a year, the capital is returned with interest, which can be reinvested depending on the market trend.
In order to get high interest, it is very important to understand the security and tax rules before investing money in any bank:
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Government guarantee up to ₹5 lakh: Be it a government bank, private bank or small finance bank, a subsidiary of the Reserve Bank of India (RBI). DICGC Under this, the principal and interest of every depositor of every bank up to ₹ 5 lakh is fully insured (protected). Therefore, investment up to ₹ 5 lakh in any one small finance bank is considered completely safe.
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TDS and Tax Rules: Interest income from FD is taxable as per the tax slab of the investor.
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For common citizens, banks deduct TDS if the interest received from all FDs in a financial year exceeds ₹40,000.
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Sections of Income Tax Law for Senior and Super Senior Citizens 80TTB Under this, interest income up to ₹ 50,000 is completely exempted from tax, and TDS is also deducted only on interest income above ₹ 50,000.
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If your total income is not taxable, then common citizens can submit Form 15G and senior citizens can submit Form 15H to avoid TDS.
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