India bank puts down bond marker

Fixed-rate bonds currently offer savers the best returns on their money, as providers reward people who are prepared to lock up their cash for a set period of time.

But the average rates paid on the products have fallen by 0.35 per cent since March as competition in the sector has eased, according to financial website moneysupermarket.com.

But the group said there are signs that the battle for savers' money is hotting up again after the Bank of Baroda entered the market.

India's third largest bank is offering one, two, three and five-year fixed-rate bonds, all of which have gone straight to the top of the best buy tables.

It is paying a return of 4.9 per cent on its five-year bond, beating the previous market leader, fellow Indian institution ICICI Bank, which offered 4.75 per cent over the same term.

Despite being a foreign bank, Bank of Baroda is authorised by the Financial Services Authority, meaning that if it did go under, consumers would be able to claim back up to 50,000 of any money lost from the Financial Services Compensation Scheme, rising to 100,000 for joint account holders.