With banks decreasing FD interest rate, here are your options for better FD returns
With demonetization taking a front seat since November 2016, banks have been changing a lot of terms and conditions, and one of them is lowering the payable fixed deposit interest rates.
Let’s First Consider the Benefits of FD Account:
a) It gets you into a habit of saving, since you cannot withdraw the money before your investment reaches maturity
b) It gives you a better interest rate than a savings account
c) It assures returns on your investment
d) It acts as a fallback in the case of an emergency or a financial crisis like a business cash flow crunch or a medical emergency
e) The entire interest is payable at maturity of your account
f) The amount of time you hold the FD account is up to you – it could be anywhere between 30 days to 10 years, but be sure not to break it before the investment reaches maturity
g) You can have more than one FD accounts for different kinds of savings you wish to have; say one is for further education, one is for the purchase of an asset, etc.
Why Are Banks Decreasing Fixed Deposit Interest Rates?
The main factor which can decipher if the bank is able to pay you or not is liquidity. Liquidity is the amount of payable cash that a bank has, which it can pay the customers as and when required. With demonetization in the graph, it has become increasingly difficult to have liquidity, especially with so many people wanting to invest in fixed deposits. So, the amount that a bank is able to pay the customer needs to be reduced, leading to the deduction in fixed deposit interest rates.
Fixed Deposit Interest Rates:
After the onset of demonetization and banks having decreased the fixed deposit interest rate to as low as 6.50% in some cases (this also depends on the tenure of your fixed deposit investment), the entire purpose of investing in a fixed deposit is defeated. So what can be done to get better returns on your fixed deposit? An alternative to investing in banks is investing in non-banking finance companies, as they offer much higher fixed deposit interest rates as compared to a bank.
Bajaj Finance Limited offers 7.85% fixed deposit interest rate to all applicants. With benefits like an additional 0.25% for senior citizens, an additional 0.10% for the Bajaj group employees and existing loan customers, as well as 7.95% interest rate for renewal of your fixed deposit from Bajaj Finance, the interest on returns is attractive. Creating an FD account with Bajaj Finance or other NBFC will give you much better returns on your investment and makes it worth having a fixed deposit account, which you can leave untouched for a duration like 5 years.
You can use a fixed deposit calculator to calculate the amount you will be receiving at the end of your fixed deposit maturity period. Most NBFCs provide online calculators so you can easily and conveniently understand which lender gives you the most returns.