Term Deposit Interest Rates: Important Things to Keep in Mind When You Apply

Fixed deposits also known as term deposits are popular instruments in our country because they ensure the safety of your deposited amount. Apart from that, they also offer a high rate of interest. 

Banks, NBFCs, and Post Offices provide FD schemes in India. However, you would still need to look at numerous other factors before depositing in a fixed deposit plan as bank FDs, corporate FDs, and Post Office FDs all come with different sets of features and benefits. These are some things that you should remember while applying for an FD:

Security of Invested Capital

Post office FD schemes are the safest as they are government-backed schemes. Though bank FDs are also considered to be safe, you might have heard about the recent debacle of some prominent banks. Therefore, it is better to go for the FDs of scheduled commercial banks as they are insured as per the deposit insurance program of DICGC.

If you want to invest in a corporate FD then you should check its credit ratings first. For example, Bajaj Finance FD has received the highest credit ratings as a stable investment as it ensures the safety of the investor’s capital.

Types of FD

FDs are basically of two types viz. cumulative and non-cumulative. A cumulative FD earns more interest as it does not give away the interest generated after calculation of interest which is done at regular intervals. Non-cumulative FDs are suitable for investors like senior citizens who also need a regular income to meet their regular needs as they provide interest periodically. 

The periodic interest options might include monthly, quarterly, bi-annual, or yearly interest payout options. Therefore, you must be careful while choosing an FD type as it must also complement your investment needs. 

Rate of Interest

The FD interest rate varies from bank to bank but in today’s time, they range from 2.5 to 5.5% approximately. Post Office FD schemes do offer an interest rate of up to 6.5% and more in some cases but their tenor options and withdrawal policies are not as flexible as bank FDs or company FDs. 

When it comes to NBFCs and other finance firms, the highest FD rate is currently 6.85% and it is offered by Bajaj Finance. Its higher term deposit interest rates along with a broad range of advanced features make it one of the better FD schemes for you. 

Withdrawal conditions & liquidity options

You should be aware of the withdrawal conditions and liquidity options offered by a financier before investing or else it might have an adverse effect on your investment. This is because you might have to close an FD abruptly during a financial emergency if the financier does not provide flexible withdrawal options. 

While post office FD plans offer less flexible options when it comes to premature withdrawals, bank FDs and corporate FDs are more lenient in this matter. However, you will have to pay a penalty fee that is a certain percentage of your interest rate if you decide to close an FD prematurely. 

With Bajaj Finance FD, you can apply for a loan if there is a sudden need for funds. You don’t have to provide any collateral for securing this loan as it is provided against your deposited amount. It means your FDs provide easy liquidity options and you also don’t have to lose interest by withdrawing your deposits early.

A higher FD rate of 0.25% is offered to senior citizens and non-seniors can avail of an additional 0.10% rate of interest by investing via an online FD form. The lock-in period for your deposits can vary from 12 to 60 months and you can use its multi-deposit facility to get multiple liquidity options as it allows you to invest in FD plans of various types and tenors at once.

Investing in a fixed deposit is one of your best options for getting high returns without any risks. However, you must be aware of certain things before applying for an FD as banks, finance firms, and Post Offices of India come with a variety of options and features. Remember that there are two FD types viz. non-cumulative and cumulative FDs before investing. Cumulative FDs will provide interest directly at maturity whereas non-cumulative FDs will enable you to earn a periodic interest payout.

If you compare the FD rates, the Bajaj Finance FD rates are the highest and it also offers a higher FD rate to senior citizens. It is a safe investment option as it has received the highest ratings for stability and safety. Also, you get other features like loans against FD, online investment process, multi-deposit facility, etc. on investing in its FD schemes.