At 7.5%, 5-year post office time deposit (POTD) offers higher interest rate than major bank FDs; should you go for it?

economictimes.indiatimes.com:

The post office time deposit is similar to bank fixed deposits. You invest money at a fixed interest rate for a definite period and earn a pre-determined return.

Backed by the government, the money in the post office term deposit is completely protected, with guaranteed returns.Interest rate compared: 5-year time deposit vs 5-year bank FDs For the July-September 2023 quarter, you could fetch an interest rate of 7.5 per cent on five-year post office time deposits. At a 7.75 per cent interest rate, only DCB Bank offers 0.25 per cent more than what a five-year POTD offers.

Meanwhile, major 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. 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.

In 5-year post office time deposits, interest is calculated and compounded quarterly but payable annually. The annual interest may be credited to the savings account of the account holder by submitting an application.