Fixed Deposits are the ideal investment plans used for regular income, tax-saving purposes, and as a risk-averse investment. It is not risky like an equity investment. The risk-returns are not unlimited like derivative securities but yes returns are assured at a fixed rate of interest and are much higher than savings accounts that too without any risk to your principal amount.
Although the sudden cut in FD rates has made many corporate fixed deposits unappealing, here we have compared FD rates of different institutions and found some higher interest rates FDs comparatively.
Though most banks, finance companies, and post offices are reducing the interest rates. Non-Banking Finance Companies (NBFCs) like Bajaj Finance that are offering higher fixed deposit rates in India. Some of the banks are offering 4-6% interest rates. Still, it is less than Bajaj Finance FDs as investors can now earn up to 7.35% with an added interest rate benefit for those who invest using online mode.
Following are the factors that affect returns on your Fixed Deposits:
1. Investment Amount
The minimum and maximum amount limit to open an FD account varies from bank to bank. The higher the amount, the higher the rate of interest applicable.
2. Tenor of Investment
Different banks and companies offer different interest rates for FDs as per your choice of the tenor. Usually, you have the option of 7 days to 10 years for FD investment. You should choose the maximum tenor to get the highest returns on your FD.
3. Interest payment frequency
Interest payment frequency affects the interest rate and its calculations. Compound interest on FDs will surely enable you to get the highest FD returns. It is advisable to choose cumulative fixed deposits to maximise returns because interest accrued on the FD will be reinvested and paid at maturity. In case you choose a non-cumulative FD with the purpose of receiving a regular periodic income, choosing quarterly over monthly frequency will be beneficial to earn higher interest.
Interest calculations may be hectic for most of you. Take the help of an online FD calculator to check the returns in seconds for any interest payout option.
The depositor is liable to pay taxes on the interest earned on an FD. Tax saver FDs, multi deposit FDs and the Systematic Deposit Plans (SDP) from Bajaj Finance are the investment plans that can help you save taxes. Find a financial manager to help you in organizing your investments to minimize taxes so that you can get the highest possible fixed deposit rates in India.
5. Premature FD withdrawals
Urgent requirements of cash can arise anytime that can force you to withdraw your FD. FD interest rate will be penalized and lower down by the bank. Therefore, avoiding withdrawal of an FD and applying for a loan against FD is advisable to get the highest interest on FDs.
While opening an FD account, check the rules of the FD issuer company regarding above all factors that affect FD interest rates.
Check for rules regarding the premature FD withdrawal penalty.
Check the maximum limit to get a loan against an FD.
Check if you can gain an additional interest rate percentage if you invest via online mode. For example, with Bajaj Finance FD, you can earn an additional 0.10% if you choose to invest online.
Check for other facilities such as the Nomination facility, Automatic renewals etc. Bajaj Finance FD offers an additional 0.10% if you go for an auto-renewal.
Check for ratings from CRISIL and ICRA. For example, Bajaj Finance FD has received the highest ratings of FAAA/Stable from CRISIL and MAAA/Stable from ICRA. This ensures your deposits are safe with them.
Gaurav Khanna is an experienced financial advisor, digital marketer, and writer who is well known for his ability to predict market trends. Check out his blog at Highlight Story.
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