When it comes to wealth creation, every individual has a different choice. It depends on an individual’s earning capacity and the amount an individual can afford to invest, the period for which they can invest, the purpose of investing, and ultimately choosing the best interest rates on investments.
Among all the other investment options, investing your money in Fixed Deposits is considered the most popular and safest option as FDs aren’t dependent on market volatility and have a predetermined interest rate with assured returns. They are pretty simple to open when you have a bank account.
Fixed Deposit Accounts
These are investment tools usually offered by banks and different financial institutions. An individual having an account with the bank can invest a lump sum amount over a certain period as per the FD chart provided by the bank. They will get a fixed interest rate income throughout their investment term.
FDs often provide interest rates that are much higher than what a regular savings bank account offers. An individual can withdraw their investments once the term of the deposit ends. However, they have an option of re-investing their money in a period.
The Housing Finance Corporations in India (HFCs), The Non-Banking Financial Corporations (NBFCs) in India, and other scheduled commercial banks provide Fixed Deposit accounts. CRISIL – Credit Rating Information Services of India Limited – is a rating agency that provides ratings to financial institutions. So if you wish to invest in FDs through HFCs or NBFCs, check the ratings of these institutions provided by CRISIL. This reveals the institution’s authenticity, whether it is safe to invest money in them or not.
If you are looking for a higher rate of interest, then go for private sector banks compared to public sector banks.
Characteristics and Advantages of Fixed Deposits
With FDs, you don’t have to worry about market fluctuations – Fixed Deposits don’t get affected by market volatility. So these are safer investments than the other investment channels.
There are no limitations on the number of deposits one can open. Therefore, you can station your money in more than one FD at a time with different interest rates and earn fruitful returns.
The duration of investing in an FD varies from seven days to ten years. Because of this flexible investment tenure, FDs are one of the most effective investment tools among investors.
Investors investing in FDs are guaranteed a fixed amount of income at maturity. You can choose how you want your interest amount to be credited to your bank account, i.e., monthly, quarterly, or yearly.
Insurance, tax benefits, overdraft feature, etc., are some additional benefits you can avail of besides getting assured returns. The Reserve Bank of India (RBI) has insured FDs up to Rs. 1 Lakh.
Overdraft facility helps to raise funds during financial emergencies. This is an add-on benefit when you have invested in FDs.
Different Categories of Fixed Deposits
FDs are classified into multiple types based on benefits the account offers, the type of account holder, and why the account is being opened. The different types of FDs are mentioned below:
Normal FD Account
This account is mainly for those aged below 60 years. The lesser the age, the lower the interest rate offered compared to the interest rates of senior citizens. Any individual residing in India can open an account.
Business FD Account
Banks provide separate interest rates and deposit terms to business FD accounts. Profit raised by organizations can be deposited temporarily in these corporate FD accounts until the cash is utilized.
Senior Citizens FD Account
As the name suggests, this account is solely for senior citizens aged 60 years and above. These accounts carry high-interest rates as compared to other FD accounts. They can also make use of the monthly interest payout option.
Tax-Saving FD Account
Individuals who do not wish to take more financial risks can use FD accounts with a minimum lock-in period of 5 years to save tax.
FCNR FD Account
NRIs can open this account and deposit the money earned overseas in India. Pounds Sterling, US Dollars, Japanese Yen, and Euro are some of the currencies generally accepted here. You can maintain your money in the same currency besides earning fair returns.
Top Banks Providing the Highest FD Interest Rates
Axis Bank, Citibank, HDFC Bank, IDBI Bank, ICICI Bank, and Kotak Mahindra Bank are a few of the top banks that provide promising interest rates on your FD investment. Every bank has its pre-determined interest rates mentioned in its rate chart. For instance, Axis Bank FD Interest rate for regular customers is @5.75% and for senior citizens is @6.50%. (These rates are the highest).
However, research thoroughly before choosing to invest in any of the bank FDs that are best for you. For the online application of FDs, you can always rely on Kuvera – India’s trusted online investment platform.