Fixed deposits (FD) are investments wherein you deposit a fixed sum of money with a financial corporation for a set time period, called the tenor. Based on the amount you deposit and certain other factors, the lender then offers you interest as a form of return on investment. The usual tenor for a fixed deposit ranges between 12 months to 60 months, and can even go up. The longer your tenor, the higher your returns.

Fixed deposits are divided into two major types—cumulative fixed deposits and non-cumulative fixed deposits. Depending on your needs, you can choose either one of them to achieve the right balance between profitability and flexibility. For example, cumulative fixed deposits offer a higher rate of return, but offer interest returns only on maturity. In contrast, non-cumulative fixed deposits provide monthly, quarterly, half-yearly, and yearly interest pay-out options but offer lower rates of interest. It is important to remember that if you earn an annual return of more than Rs.10,000 from  fixed deposits, you need to pay taxes on your earnings.

Get The Best Interest Rates on Your Fixed Deposits

In India, fixed deposits are a highly-preferred mode of earning returns due to the security they offer coupled with profitable rates of interest provided by the competitive fixed deposit market. However, if you wish to make the most of your fixed deposit investment, it is advisable to obtain in-depth knowledge of the various schemes and conditions under which you can acquire the highest fixed deposit interest rates. Here’s a few things you should keep in mind to ensure maximum gains:

The longer The Tenor, The Higher Your Interest Rate

Although fixed deposit investments can be made for any length between 1 year to 5 years or more, you will earn more the longer your tenor period. For example, the annual rate of interest on a fixed deposit of anywhere between 1 year to 2 years is 7.80%, while the same amount, if invested for a period of 3 to 5 years, will yield an interest rate of 8.05%.

Cumulative Fixed Deposits Offer a Higher Payout As Opposed To Non-cumulative Fixed Deposits

If you are willing to lock in your money for a fixed period of time, you can gain a higher rate of interest. If you would rather receive monthly, quarterly, half-yearly, or yearly pay-outs, the rate of interest decreases. It all depends on how flexible you wish to be. For example, the cumulative rate of interest for a tenor of 5 years is 8.05%, but a non-cumulative rate of interest on the same amount and same tenor will yield comparatively lower returns based on how often you want a payout. This means that the half-yearly, quarterly, and monthly non-cumulative rate of interest on the same amount for 5 years will be 7.89%, 7.82%, and 7.77% respectively.

Also Read: What is An FD Calculator And How Does It Help?

Choose An Interest Rate Tailor-made For You

Some financing corporations offer higher rates of interest based on you meeting certain criteria. For example, Bajaj Finance offers an existing loan customer, Bajaj group employees, and returning fixed deposit customers an additional .10% rate of interest on top of any other offers. This means that if you are an existing loan customer and renew your fixed deposit, you can acquire an interest rate of 8.25%! Similarly, the basic rate of interest offered to senior citizens is an industry-high 8.30%, which can be increased even further to 8.40% if you opt for renewal of your FD.

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