Indian investors can keep their money in banks for a fixed period thanks to Fixed Deposits. The investment period may be between seven days and ten years. Interest rates on Fixed Deposits are typically higher than those on savings accounts.
Standard Fixed Deposit plans, tax-saving plans, plans for senior citizens, etc., are all options. In addition, any Indian citizen, NRI, minor, institution, old, or partnership firm can open fixed Deposit accounts.
Most Indians who question where they keep their extra money will use Fixed Deposit plans. Making an FD investment in this context is equivalent to being financially mature. So if you have one of these accounts, it can help you get through tough financial times.
Fixed Deposits are investments that allow people to park a sizable portion of their extra savings and experience significant wealth growth. These instruments are not market-linked. As a result, they do not carry the same risks as mutual funds or stocks.
However, why did Indians begin to fall in love with fixed-deposit investments? In the face of so many other options, why does the populace keep investing its disposable income in such things?
In this blog, we will first take a closer look at this norm before learning more about how Fixed Deposits have changed over time in India.
For those looking for guaranteed returns on their deposits, Fixed Deposits are one of the best savings instruments. A Fixed Deposit is a bank account that is opened where the bank guarantees to pay interest on the funds deposited for a predetermined amount of time. Therefore, you can increase the returns on money in your savings account by making a Fixed Deposit.
In a Fixed Deposit system, the bank sets aside the predetermined amount for the duration of the deposit period. Depositors can create Fixed Deposits with banks for terms ranging from seven days to ten years. The length of time the funds are deposited with the bank determines the interest rate on the deposit. The depositor cannot withdraw the money before the payment due date.
Some banks offer premature withdrawals, but the interest rate is lower. The principal and interest are credited to the depositor's bank account on the maturity date by the bank.
As a result of people’s desire to maintain a risk-free investment strategy, Indians view Fixed Deposit schemes as one of the safest investment options.
Unlike other investments, FD accounts are secure and trustworthy and produce modest but guaranteed returns. Senior citizens, therefore, favour investing in plans that provide the best FD rates.
Indians know that Fixed Deposits are a secure investment, nearly as fast as their savings account. Such tools also provide several additional advantages, including-
Fixed Deposit returns are predetermined. The bank guaranteeing the customer's interest rate must always pay the agreed-upon sum. Therefore, the customer assumes no risk when there are guaranteed returns.
Additionally, FD rates of return are higher than bank savings account rates. Fixed Deposit interest rates range from 3.5% to 8% annually, depending on the bank and the tenure you choose.
The best feature of FDs that Indians adore is the ability to make capital withdrawals as needed. The fact that the money is immediately available makes it the ideal investment for handling emergencies. However, being premature results in penalties.
You can use your Fixed Deposit account as collateral for financial institutions to extend you a line of credit. You can also get these loans without meeting additional eligibility requirements.
These credits typically have loan-to-value ratios between 85% and 90%. Contrarily, equity investments or mutual funds do not provide such credit facilities.
A Fixed Deposit account can be used as leverage to get a secured credit card. Similar to loans, these credit cards have borrowing limits that can reach up to 90% of your fixed deposit amount. These cards also have lower interest rates than standard credit cards.
These options are available to people who do not have the required credit score to choose unsecured credit card options.
Due to the ongoing coronavirus pandemic, people are now opening, renewing, or closing their bank FDs online. Using mobile or online banking is a simple way to do it, and the quick and easy access makes people choose FDs.
The tenure of your choice is available in Fixed Deposits. The term can be as short as seven days, as long as ten years, or less than one year.
Market turbulence cannot affect how much money FDs generate in returns. As a result, they represent a low-risk investment choice with respectable returns.
After retirement, it is easy to generate a comfortable income if you park your savings in a non-cumulative FD. Those who do not have the luxury of relying on a generous pension will find this a handy option.
FDs are a good choice if you want to develop an investment habit but do not have a lot of money to start with because investment amounts can start as low as ₹500.
An easy hack to calculate your initial investment is using an FD Calculator. It is a convenient and handy tool to evaluate what amount you can avail of on investing a certain amount for a certain period.
Fixed Deposits can help you maintain a portfolio balance. FDs do not carry risk, whereas market-linked instruments like stocks and mutual funds do. They are risk-free investments that guarantee a return over a predetermined time.
If you want guaranteed returns and do not want to risk your money, a Fixed Deposit is a great investment choice. Additionally, if you require a loan from your bank, you can use your FD as security.
Now that you are familiar with Fixed Deposits and how they operate, you might want to consider applying for one, but only after doing your research and gathering all the necessary data on the various Fixed Deposit instruments.