A fixed deposit is a secure investment option, which investors can avail if they want to save their money & earn a decent interest on it. Almost all recognized banks & many reputable non-banking finance companies offer fixed deposit schemes at different rates. This post will take a look at the income potential of fixed deposits.
How Much Can You Earn On Fixed Deposits?
We all know that Fixed Deposit(FD) is a traditional & safe investment mode. It offers an interest higher than a savings account, yet it is devoid of market risks, unlike investment in shares. In some cases, it is also eligible for a tax deduction.
FDs come with variable tenures – from as short as 7 days to as long as 10 years. Depending on your requirement for funds, you can select the tenure. At the end of the specified tenure, you can extend the deposit if you want, by renewing the FD.
Most major banks & Non-banking Finance Companies (NBFCs) offer fixed deposit facilities to customers. The rates of interest vary with the tenure & amount of deposit. You can’t withdraw your FD before the maturity date. However, banks allow partial withdrawal and also loans against FD.
You can enjoy the best FD rates if you follow specific steps – like making the FD online, or looking for options beyond banks. Often, a highly-rated NBFC can offer better rates than a bank. Also, if you select a cumulative deposit option, the interest will enjoy the benefit of compounding. The compounding generally happens at the end of the financial year, i.e., on March 31.
FD rates of financial institutions depend on several factors like – RBI policy changes in respect of repo rate, base rate, etc., the bank’s liquidity situation, overall economic scenario, and credit demand levels.
At present, in India, fixed deposit interest rates for different private banks are different (like HDFC Bank, Axis Bank, Kotak Bank, etc.) start at 3% to 3.50% per annum, going up to 7.85% that DCB Bank offers. At this point in India, DCB Bank offers the highest FD rates among banks. Most nationalized banks start their FD rates at around 4% to 4.50% per annum. The rates for senior citizens are also differes from financial instution i.e, 0.5% higher.
Most Non-banking Finance Companies (NBFCs) offer higher rates of interest than banks. PNB Housing Finance & Bajaj Finserv start their FD at 8% per annum interest or slightly higher. PNB Housing Finance offers up to 8.45% per annum (on a non-cumulative deposit, for a tenure of 60-71 months). Most NBFCs offer 0.25% higher rates for senior citizens.
To conclude, there are lots of options for you to invest in an FD in India today. Evaluate all options, depending upon the amount you would want on maturity, and the duration for which you can invest the amount, without putting a strain on your finances. Invest after planning carefully, and you can benefit for sure from this time-tested investment mode.