Things to Know About Term Deposit Interest Rates in India
by Mashum Mollah Investing Published on: 15 September 2016 Last Updated on: 07 November 2024
In today’s fast-paced world, people often want to invest their money in instruments that will give them high and quick returns. However, it is important to keep in mind that such instruments come with high risks. If you want to keep your money safe than term deposits are the best way forward.
What is the Term Deposit?
This is a type of deposit in which you put your capital in a financial institution for a fixed amount of time with an agreed rate of interest. For Fixed Deposits, the maturity period can range from a few months to 10 years. At the end of the tenure, you get back the amount you had invested, plus the interest you earned on that same amount.
Interest Rates:
Term deposit interest rates in India vary from bank to bank. It also depends on which category you fall under. For example, senior citizens are eligible for higher interest rates than others. Banks often have special schemes for students and minors, which offer better interest rates than normal. The rate of interest also depends on the principal amount and tenure. At present, the rates offered by the various Indians banks range from anywhere between 7% to 9.25%. In order to find the best rates, you should always do Fixed Deposit rates comparison in Indian NBFCs or Banks before investing.
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How to open a Fixed Deposit:
You can open Fixed Deposits Accounts Online. Simply fill up a form on the bank’s or NBFC’s website and submit it online. In most cases, customers do not even have to step out of their homes to open a term deposit.
Advantages of Fixed Deposit:
Fixed Deposits are one of the safest investment vehicles in the market as they are regulated by the Reserve Bank of India. There little to zero risk of losing money in a Fixed Deposit.
On top of that, FDs come with guaranteed returns. You will know your exact maturity amount right at the start of the tenure. Your interest rate will not fluctuate with the share market, ensuring that you will receive the predetermined amount at the time of maturity.
Fixed Deposits give you higher interest rates than savings accounts. This is because you are allowing the bank to hold your money for a fixed period of time, which means they can use that amount to invest in higher gain financial products for their own profit.
FDs are also flexible in nature. You have the freedom to choose the principal amount and the tenure, depending on your present financial condition and your future financial goals.
If you choose a Non-cumulative FD, the interest that you earn on the principal will be paid out to you every month or quarter or year. This periodic cash flow can be very useful for those who need a regular income.
Disadvantages of Fixed Deposit:
Not surprisingly, because Fixed Deposits come with low risk, they give you lower returns when compared to other investment vehicles.
Also, since your money is locked up for a certain period of time, liquidity becomes an issue. If you need emergency funds, you can withdraw the money prematurely but you will most likely have to pay a penalty to the bank.
Now that you have seen the Fixed Deposit advantages and disadvantages, you are at a better position to judge if such term deposits are suitable for you or not. If you have a low risk appetite and want your peace of mind, then term deposits are certainly the way to go.
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