Given their popularity, FD interest rates in India are often conversation starters. When opening a fixed deposit scheme, investors prefer plans that offer the highest interest rate. However, that may not be the correct strategy. In this article, we discuss some of the best fixed deposit schemes in India and explain the intricacies of these plans.
What is a fixed deposit?
Basically, a fixed deposit is a specified amount maintained with a bank for a specific period. While this broad definition may include a savings bank account and a credit card, a fixed deposit stands out as the amount is fixed. The fixed deposit differs in the way it offers a reward to its holder (interest) and also demands the depositor (customer) maintain the funds for a specific period (tenure). You should also know that banks and financial institutions generally discourage customers from prematurely withdrawing money from a fixed deposit.
Reasons why you need to include FD in your portfolio
Including fixed deposits in your investment portfolio can provide various benefits, such as reducing overall portfolio risk, offering surety of returns, flexibility, and better interest rates. You should consider including fixed deposits (FDs) in your financial portfolio for several reasons. Basically, they are low-risk investments that offer investors guaranteed returns, flexible investment options, and much-needed diversification to investors. However, it is essential to carefully consider your investment goals and risk tolerance before making any investment decisions.
Reduce your portfolio risk
Fixed deposits can help reduce the overall risk of your portfolio. FDs come with hardly any risks, provide guaranteed returns, and are not linked to the stock market.
Surety of returns upon maturity
Fixed deposits offer a guaranteed return upon maturity, meaning you know exactly how much you will earn at the end of the investment period. This can provide security and help you plan your finances better.
Option to choose between cumulative and non-cumulative terms
With fixed deposits, you can choose between cumulative and non-cumulative terms. Cumulative FDs allow you to earn compound interest on your investment, which can result in higher returns over time. Non-cumulative FDs, on the other hand, provide regular interest payouts that can be useful for those who need a regular income.
Flexibility to withdraw funds
FDs provide the option of premature withdrawal, which means you can access your funds in case of any emergency or sudden financial need. This can provide flexibility and liquidity to your investment portfolio.
Better interest rates
Fixed deposits generally offer higher interest rates than savings accounts, which can help you earn better returns on your investment. Additionally, FDs also provide special interest rates for senior citizens.
Which bank is best for fixed deposit investment?
Investors need to assess the market, research, compare options and invest in a fixed deposit scheme. Some of the factors to consider while choosing a bank for fixed deposit investment are:
- Interest rates: Look for a bank that offers competitive interest rates on fixed deposits. Higher interest rates can help you earn more on your investments.
- Credit rating: Check the bank’s credit rating before investing in fixed deposits. A higher credit rating indicates a lower risk of default.
- Tenure: Choose a bank that offers flexible tenure options. Longer tenure options can help you earn higher interest rates.
Premature withdrawal penalty: Look for a bank with low or no penalties for premature withdrawal of fixed deposits. This can give you the flexibility to withdraw your money in emergencies. - Additional benefits: Some banks offer other benefits like overdraft facilities, loans against fixed deposits, and insurance cover on fixed deposits. Look for a bank that offers these additional benefits to maximize your returns.
HDFC Bank FD
HDFC Bank, a leading private sector Indian bank, is a reputed and trusted bank known for offering competitive interest rates on their FDs. The bank offers flexible tenures ranging from 7 days to 10 years, allowing investors to choose the term that suits their needs. HDFC Bank FDs come with a monthly, quarterly, or annual payout, making it an attractive investment option for those who require a regular income. Yet, HDFC Bank’s FD interest rates are not as high as some other banks and NBFCs in India, and the bank may charge a penalty for premature withdrawal of funds.
Bajaj Finance FD
Bajaj Finance is a well-known non-banking financial company (NBFC) in India that offers high-interest rates on their FDs. The company’s FDs are rated as ‘AAA’ by CRISIL and ICRA, indicating a high level of safety for investors. Bajaj Finance offers flexible tenures ranging from 12 to 60 months, along with the option of a cumulative or non-cumulative payout. Bajaj Finance’s FDs may not be as easily accessible as other options, and the company may charge a penalty for premature withdrawal of funds.
ICICI Bank FD
ICICI Bank is one of India’s largest, reputed private sector banks, known for offering competitive interest rates on their FDs. The bank offers flexible tenures ranging from 7 days to 10 years, allowing investors to choose the term that suits their needs. ICICI Bank FDs come with the option of a monthly, quarterly, or annual payout, making it an attractive investment option for those who require a regular income. ICICI Bank’s FD interest rates may be a tad low than some other banks and NBFCs in India, and the bank may charge a penalty for premature withdrawal of funds.
Bank of India FD
Bank of India is a government-owned bank in India that offers competitive interest rates on their FDs. The bank offers flexible tenures ranging from 7 days to 10 years, allowing investors to choose the term that suits their needs. Bank of India FDs come with the option of a monthly, quarterly, or annual payout, making it an attractive investment option for those who require a regular income. Bank of India’s FD interest rates may not be as high as some of the other banks and NBFCs in India, and the bank may charge a penalty for premature withdrawal of funds.
Federal Bank FD
Federal Bank is a private sector bank in India that offers competitive interest rates on their FDs. The bank offers flexible tenures ranging from 7 days to 10 years, allowing investors to choose the term that suits their needs. Federal Bank FDs come with the option of a monthly, quarterly, or annual payout, making it an attractive investment option for those who require a regular income. The bank may charge a penalty for the premature withdrawal of funds.
Conclusion
You should choose an FD that offers a good balance between high-interest rates and flexibility in terms of tenures and payouts. You should also consider the reputation and safety ratings of the bank or the NBFC before making a final decision.
FAQs
Which is the best fixed deposit scheme in India with higher returns?
When choosing fixed deposit schemes, consider factors like interest rates, customer service, credit rating, repayment terms, and more. Retail NBFCs can offer competitive rates, but safety matters.
Which bank is giving 7% interest on FD?
As of 2023, HDFC Bank offers fixed deposit (FD) schemes with an interest rate of up to 7.5%. It provides competitive FD rates for investors.
Which bank pays highest interest on FD?
As of 2023, HDFC Bank offers one of the highest fixed deposit (FD) interest rates, up to 7.5%. Other banks like Axis Bank and IndusInd Bank also provide competitive rates.
Which bank is safest for FD?
The safety of your fixed deposit (FD) depends on factors like the bank’s reputation, government insurance, and financial stability. Nationalized banks like State Bank of India (SBI) and Punjab National Bank (PNB) are often considered safe due to government backing and a long-standing presence. However, private banks like HDFC and ICICI are also reputable choices. It’s important to check for FD insurance up to ₹5 lakh under the Deposit Insurance and Credit Guarantee Corporation (DICGC).
Which bank is best for fixed deposit for 1 year?
For a 1-year fixed deposit, HDFC Bank offers competitive interest rates, often ranging from 7.10% to 7.60%. It’s considered a reliable choice among various banks.
