Moneycontrol
Last Updated : Nov 29, 2017 05:14 PM IST | Source: Moneycontrol.com

Why bank fixed deposits are a good avenue to park your money

Bank FDs are one of the safest investment-cum-savings avenue which can help you get 7-9% return annually.

Navneet Dubey @imNavneetDubey

Most of us keep some money in saving banks account because of two reasons – it is safe and can provide regular income via interest. It is also liquid and can be accessed in times of need.  However, the returns on savings bank are not high and may not meet the regular income needs.

Banks offer comparatively low rate in savings bank deposits which simply means that your money is not growing at the right pace. Therefore, you need to think that how you can earn more returns provided you are getting safety and guaranteed return by keeping your money in banks only. Within the bank deposit space, a better alternative is fixed deposits. Bank FDs are one of the safest investment-cum-savings avenue which can help you get 7-9% return annually. These days, you do not even need to go to the bank to open an FD, but can do it online.

Adhil Shetty, CEO, BankBazaar.com says that FD is an ideal investment option for an investor who is looking at fixed and assured regular income. Also, the returns from FDs are guaranteed and the FD itself can be used as collateral for loans. “FDs should be looked at more as a savings product than an investment product. Net of tax, the real return from fixed deposits tends to be lower than inflation at most times. Hence, calling it a savings product is perhaps more appropriate,” he said.

Returns on bank FDs vary as per the tenure you opted to make your investments. Also, you can avail tax benefit on a fixed deposit made for a minimum of 5 years. Any deposit below the said tenure is not eligible for doing tax savings.

“As the name suggests, the original amount invested in tax-free FDs up to Rs 1.5 Lakh is exempt from taxation under section 80C. The tax-saving FDs are available to all public and private sector banks. However, if you want to avail the tax benefits, you need to invest in a 5-year deposit. So the amount remains locked for a period of 5 years. Most banks do not even allow partial withdrawals. Moreover, while the principal is tax-free, the interest earned is still taxable. The interest rate, while more than the SB interest, is much lower than the rate of inflation,” said Shetty.

Here are some of the fixed deposit schemes offering returns at several intervals offered through various banks.

Top FD rates offered by major banks
Bank name FD interest rate Tenure
Axis Bank 6.85% 17 months to less than 18 months
HDFC Bank 6.75% 1 year to 1 year 3 days
ICICI Bank 6.75% 1–2 years
Bank of Baroda 6.65% 1 year to 400 days
Punjab National Bank 6.60% 1 year
State Bank of India 6.25% 46 days to less than 2 years
Source: Paisabazaar.com
Top FD rates offered by other banks
Bank name FD interest rate Tenure
IDFC Bank 7.50% 366 days
RBL Bank 7.20% 2 year to less than 3 years
Bandhan Bank 7.15% 1 year to less than 2 years
DCB Bank 7.10% 3–5 years
Yes Bank 7.00% 3 years 10 Days to 3 years 20 Days
Source: Paisabazaar.com
Top FD rates offered by small finance banks
Bank name FD interest rate Tenure
ESAF Small Finance Bank 9.00% Above 1 year to 2 years
Fincare Small Finance Bank 9.00% Above 2 years to 3 years
Suryodyay Small Finance Bank 8.75% Above 2 years to 3 years
Utkarsh Small Finance Bank 8.00% 1 year to less than 2 years
Ujjivan Small Finance Bank 8.00% 1 year to 2 years
Source: Paisabazaar.com
 
First Published on Nov 29, 2017 10:40 am
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