Your Guide To Term Deposit Interest Rates In India

Posted by Aman Khanna
April 28, 2017

Self-Published

Fixed deposit accounts are like a savings account with a fixed term. The money has to stay in the account of the full term for you to get the maximum benefits from it. Term deposit interest rates in India varies according to tenure of the deposit and also depending on the FD scheme. The interest rate also varies between banks.

 

Fixed Deposit Rates Comparison in Indian Banks

Go to online financial portals and online marketplaces. Do a search for the best FD rates across various lenders. Choose different schemes and fine tune the comparison. Note down a few plans that seem attractive to you and explore further. Bank term deposits are good savings options as your money and returns are guaranteed. Banks function under the regulation of the RBI as do NBFCs. So, a part of your spare funds can be put aside in these secure investments while you use the rest in high growth investment options.

FD Tenures and Schemes

In India, interest rates on term deposits are in the range of 4% to 8%. Generally, NBFCs offer slightly better rates. And senior citizens can also get higher interest rates on Fixed Deposit than other customers. Choose your deposit plan according to your needs. If you will need access to the funds quickly, don’t put the money in long term deposits. On the other hand, the interest rates on short-term deposits are mostly not much higher than the interest paid on savings accounts.

For very short term deposits, keep the money in savings accounts. They offer complete liquidity. Plus, you also get tax exemption on a maximum of Rs.10,000 interest earnings on savings accounts.

Long term deposits generally offer higher returns. Open FDs for different tenures – one for 3 years, the next for 4 years, another for 5 years and so on. This ensures that you will have FDs maturing each year. You get access to the funds without having to break the deposit, unless in case of dire emergencies.

You can also invest in Tax-saver FDs. These are for a tenure of 5 years. You cannot break the FD before term nor can you get a loan against it. However, under section 80C, you get tax exemption on the original amount deposited.

Fixed Deposits Accounts Online

You now have the facility of opening FD accounts online. Just go to the bank or NBFC of your choice and create the FD, transfer funds to the account and you are set. If you already have a Savings account with that bank, the task is made even easier. You must go to the FD section of your customer portal, choose the type and tenure of the FD and transfer funds to it from your savings account. The whole process can be completed within minutes.

Fixed Deposit advantages and disadvantages

Fixed deposits are convenient savings schemes, but they’ve both benefits and drawbacks:

Advantages of Fixed deposits

  1. Fixed deposits are easy to open, you can create them online
  2. Online customer portals give you the facility to manage FDs and check on their current status easily
  3. Fixed deposits are relatively liquid. Most FDs except tax saving FD can be broken before term if you are in urgent need of funds
  4. You can get loan against FDs, which helps you avoid the penalties and interest loss involved in breaking an FD before full term
  5. Fixed deposits are highly flexible you can open an FD for as few as 7 days to as long as 10 years
  6. Your money in a bank is insured up to a maximum of Rs.1 lakhs, and bank and NBFC fixed deposits operate under strict RBI guidelines. So, both the prmcipal and the returns are safe and guaranteed
  7. You can create income plans with FDs by opting for monthly or quarterly interest payouts
  8. You can choose interest compounding and increase the returns you get on the FD

Disadvantages of Fixed Deposits

  1. Fixed deposit interest rates are not high, so you get very little return on investment
  2. FD interest earnings are fully taxable
  3. Combined with low interest rates and taxes, fixed deposits are not the ideal investments to beat inflation
  4. Fixed deposits can be broken before term, but this involves penalty charges and loss of interest

Fixed deposits are popular savings schemes in India, they are secure and provide guaranteed returns. Combine a few FDs along with mutual funds and share market investments in your portfolio, balance out risk and growth of funds.

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