Fixed deposit is undeniably the most secure way of investment. It enables you to park your savings safely. The fixed deposit interest rates are significantly high and thus it enables you to earn a substantial return after a fixed time period. The interest rate varies from bank to bank. The tenure can be anywhere between 1 week to 10 years. However, the higher the tenure and amount deposited, the higher the returns.
The interest rate of the fixed deposits of various banks is determined on the basis of the changes in RBI’s monetary policy. This includes base rate, repo rate, credit demand, economic status and the like.
Fixed deposits with best interest rates
Different banks offer different fixed deposit interest rates. Here is a list of banks along with their interest rates for you to ensure the best return against your deposit amount.
|Canara Bank||4%-6.25%||7 days to 10 years|
|HDFC||3%-6.25%||7 days to 10 years|
|SBI||3.30%-6.50%||7 days to 10 years|
|PNB Housing Finance||7.20%-8%||12 months to 120 months|
|Axis Bank||3.50%-6.75%||7 days to 10 years|
|ICICI Bank||3.25%-6.25%||7 days to 10 years|
|IDFC Bank||4%-7.75%||7 days to 10 years|
|Lakshmi Nivas Bank||7.8%||450 days|
Factors influencing the returns of fixed deposits
Interest rate is not the only parameter to decide the returns on your investment. There are several other important factors that must be taken into consideration to get higher returns.
The amount of deposit
It is always good to deposit a high amount while investing in an FD. The greater the sum, the greater is the return. However, if the deposit surpasses Rs. 1 crore, the interest automatically goes down. Thus always make sure that your bulk amount does not cross Rs. 1 crore.
The deposit term
Always choose a longer term for your FD. This is because the longer the tenure, the higher is the interest rate. However, if you select a shorter tenure, the bank will offer you a lower rate of interest, this means you will not earn a good return.
Type of fixed deposit scheme
The rate of return also depends on the type of fixed deposits. There are usually two types of fixed deposits.
- Cumulative: If you choose a cumulative FD, you will gain a higher rate of return. This is because the rate of compounding is best utilized in a cumulative interest.
- Non-cumulative: If you choose a non-cumulative interest, the interest rate is low. Although you will receive your interest on a regular basis, the returns will not be that high.
Type of investor
Indian banks offer a higher rate of interest for senior citizens. The interest rate varies between 3.50%- 9.75% for senior citizens, which is higher than regular FD interest rates. But, this too depends on the tenure and amount. Besides, there are certain banks that enable higher interest rates if the depositor is a woman.
Closing the FD account on time
It is important to close your account at the time of maturity. This ensures the timely return of the deposit amount added with the accumulated interest on it.
There are times when you need to break your FD before maturity. This can be due to an emergency or to reinvest the amount elsewhere. But withdrawing your FD before the term expires is of no good. The bank will not only reduce your interest rates but may also impose a penalty. This means you will get smaller returns against the sum deposited.
If you withdraw a part of your sum before maturity, the bank will impose a one percent penalty. You can make a partial withdrawal in the unit of Rs. 1000 only. However, the left balance keeps earning interest.
The economic condition of the country is an important factor that determines the rate of interest. If the economy is flourishing and there is no recession or inflation of money, the interest rates are bound to be higher than usual. If you invest in fixed deposits during this time, you are likely to get higher interest rates and better returns at the time of withdrawal.