Bank FDs now score over govt saving schemes

Bank fixed deposits are back in favour. For the first time in five years, the rates seem more attractive than government savings schemes. CNBC-TV18 has more.

No pain, all gain. 9% on bank FDs, plus tax benefits. Banks now offer 9% or more on tax-saving FDs. Bank FD rates have risen nearly 2% in the past six months and investors seem to love it.

KVS Manian, Head: Retail Liabilities, Kotak Mahindra Bank says, “Percentages vary from customer to customer depending on their risk appetite, the kind of asset classes they hold, but I would say if a person who was putting 0 is now looking at putting 10%, people with 20-30% asset book are now doing 30-40%. That’s the kind of shift happening.”

Banks are wooing depositors to spruce up their books. FDs have an edge over Government savings schemes like PPF, NSC which offer 8% interest.

Although post-office schemes come with tax benefits, the lock period is almost twice as long as short-term FDs. Experts say that for investors for whom tax saving is not a priority are better off with these short term bank FDs

Gaurav Mashruwala, Certified Financial Planner says, “Except PPF where you get sec 80C benefit when you invest and take out money and NSC where only when you invest, everything else is anyway taxable. So between 8% taxable and 9% taxable will score.”

With interest rates looking up over the past few months, investors hope FDs will get more attractive. It remains to be seen whether bank FDs will cross the double-digit mark. That would mean even more gain without the pain.