The Variation In Fixed Deposits In India

  • Added:
    Mar 04, 2014
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The Variation In Fixed Deposits In India Photo by Aishwarya Mahurkar

A Fixed deposit is a standard safe investment employed by most individuals. Without thorough research though, different FDs available may appear to be the same. There are, however, several customizable variations available as well. Keeping this in mind, it is best to consider all the possible permutations and combinations before making your final decision. These factors include:

Organization: Most people fail to look for variation here. The lack of research can potentially cost you the best interest rates available. While the traditional approach is to invest in the bank that you use for personal banking, it may not offer you the best rates. While the difference between rates might not be drastic, owing to the competitive nature of the market, it is always better to get more rather than less.

Payout: This is a very important variation between fixed deposits in India . Depending on your strategy, users can ask for monthly, quarterly or annual payouts on the deposit. You can also ask to re-invest the interest earned, in order to gain even more returns. This re-investment feature is similar to the growth feature of Mutual funds, but is not available in every bank or financial institution. It is important, though, to use these options based on your financial requirements, expenses and monthly cash flow.

Time: There are several different time frames available. The minimum period for a fixed deposit investment  is 7 days while the maximum period can vary from 5 to 10 years. The best interest rates come from long term investments, though. Most people hesitate to invest for such a long duration and instead opt for the period of a year instead. The relatively shorter period, if you have certain financial requirements in mind, offers the right balance of liquidity and interest rates for most people. As an investor, if you don’t foresee the need or premature withdrawals, you should opt for the longest possible duration as it will result in the highest return. For the most part, the interests for these deposits are almost the same as what is earned on a savings account.

Age group: Senior citizens get higher interest rates in comparison to the lower age group, which could be a big advantage for some. A common strategy to avail this advantage is to invest in the name of your family member who is a senior citizen. This strategy, though, has some limitations. While the returns are higher, it is tougher to get premature withdrawals or overdraft facility if you invest in someone else’s name.

Overall, a fixed deposit has high liquidity and decent rewards. Professional investors, though, don’t favour this as it comes with lower returns than the stock market. Keeping in mind that you will receive around 8 to 10 percent interest, this is understandable. The right strategy will be to use this tool as a potential safety net to help sustain losses incurred in the stock market. You can also use the high liquidity of this investment during any kind of emergency.

Author's Profile

An experienced writer on finance topics, the author articulates of investment choices such as fixed deposits in India & recurring deposit schemes. She writes about a variety of topics including the benefits of recurring & fixed deposit investment and how to make the right investment choice.


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