Banks have revised their interest rates for short-term investments because of the liquidity of funds in such investments. Short-terms investments that would fetch investors an interest rate of 7.5% or 8% in most institutions will only get them as little as 6% in certain private banks for investments with a lock-in period of less than 3 years for deposits up to Rs.1 crore and less. Not only has this been put to effect immediately, but according to industry experts, it is also unlikely to stabilize or change anytime soon. The FD rates revision is not great news, but it does not have to necessarily be bad news either. There are a lot of ways in which you can still invest your savings to gain a sizeable additional income and not be affected by the change in interest rates.

Tenor is Key

While banks have cut down on the interest rates for FDs on a short term tenor, what investors may have failed to notice is that the interest rates have also been raised for long term deposits. While this is a strategic move on the part of banking institutions that no longer want to encourage investors from making small investments over a shorter period, this is also a favourable move for investors.

While a longer lock-in period may make a few investors sceptical, it is always a wise move to pledge a large sum in one long-term investment, especially one that is not subject to market risk. So enjoy a steady additional income over a long period of time than keep looking for schemes that may or may not offer a certain rate in some months.

A Maturity Basket That Works For You

A lot of young investors may not have the savings to invest a lump sum amount at once or lock-in their income for a very long period due to lack of any other source of steady income. It is important to then choose what your priority is: a larger income and interest rate or to be able to access your income over a period of 6 months to 1 year?

Choosing a maturity basket is more important that making an uninformed decision in haste to avail of a higher interest rate on FD. In such a situation, a bank may then not be the best institution to invest in an FD. Financing companies that are not subject to these interest rates can still offer an interest rate as high as 8% and above on smaller tenors and maturity periods.

Look For Alternate Investments

While a lot of the popular banks and big names in the business have already revised their rates since the State Bank of India announced cuts on interest rates, it is advisable that investors utilize this opportunity to look at other companies like non banking financial institutions. Bajaj Finance, for example, is not only one of the most trustworthy names in the market, but is also known to offer one of the highest interest rates to investors todays. Log on to their website and go through a simple online process to sign up for an FD and avail lucrative interest irrespective of the cuts affecting banking institutions.

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