AWS Secrets Manager is designed specifically to securely store and manage sensitive information such as database credentials. It integrates seamlessly with AWS services like Lambda and RDS, and it provides automatic credential rotation with minimal operational overhead.

AWS Secrets Manager: By storing the database credentials in Secrets Manager, you ensure that the credentials are securely stored, encrypted, and managed. Secrets Manager provides a built-in mechanism to automatically rotate credentials at regular intervals (e.g., every 30 days), which helps in maintaining security best practices without requiring additional manual intervention.

Lambda Integration: The Lambda function can be easily configured to retrieve the credentials from Secrets Manager using the AWS SDK, ensuring that the credentials are accessed securely at runtime.

Why Not Other Options?:

Option A (Parameter Store with Rotation): While Parameter Store can store parameters securely, Secrets Manager is more tailored for secrets management and automatic rotation, offering more features and less operational overhead.

Option C (Encrypted Lambda environment variable): Storing credentials directly in Lambda environment variables, even when encrypted, requires custom code to manage rotation, which increases operational complexity.

Option D (KMS with automatic rotation): KMS is for managing encryption keys, not for storing and rotating secrets like database credentials. This option would require more custom implementation to manage credentials securely.

AWS References:

AWS Secrets Manager- Detailed documentation on how to store, manage, and rotate secrets using AWS Secrets Manager.

Using Secrets Manager with AWS Lambda- Guidance on integrating Secrets Manager with Lambda for secure credential management.