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In 2016, when our Honorable Prime Minister Mr. Narendra Modi changed the currencies and limit the deposit, retrieve and exchange of currency notes to know how much people have saved or they have collected as a black money in cash. The amount which was deposited in account was also estimated for every individual. The major problem was being faced by the females of our country who at times keep currencies at home without anybody’s knowledge for any emergency. When this problem came in light that what to do with the female’s savings, the bank suggested them to do fixed deposits of small amounts on a regular basis which will not lead them to this situation in future.
Many of us who know little about financial investment do fixed deposits (FD’s). We do fixed deposits with whatever amount we get on several occasions like birth of child, weddings, birthdays, house warming ceremonies and many other. Even our kids get money for so many years from our relatives and friends. So we can also get that money saved as FD which can be beneficial at any hour of need.
When we deposit a minimum amount in a bank for a fixed tenure at a fixed rate of interest, it is known as a Fixed Deposit or FD. It is a financial instrument which is tried and tested for a significant period of time and gives consistently excellent returns. This makes it one of the safest investment options. Also, FDs is a good investment point for someone who is investing for the first time.
Asking anyone who knows little about financial investment or banks but who is not very much into Mutual Fund Investment or investing in shares and all will suggest you to save through FD’s only. There are many other reasons why Fixed Deposit is the most popular and first choice for financial products in India. Following are some of the major benefits of Fixed Deposits in India:
Preferred Mode of Interest Payment:The customer is free to choose the frequency of interest they want to receive. It can be on a monthly, quarterly, or yearly basis. This turns to be another source of income for the customer. Alternatively, a customer can opt for a Cumulative FD in which the interest is reinvested into the FD after the tenure is completed and can deliver even better returns.
Decide Your Tenure:The tenure for Fixed Deposits is very flexible. It ranges from 7 days to 10 years, depending on the customer’s requirements. You can have multiple Fixed Deposits in the same bank at the same time for same or different tenures. You will receive a separate receipt for each and every FD.
More Profitable:The rate of return is much higher on fixed deposits as compared to a savings account. The interest rates fluctuate based on the tenure of the Fixed Deposit. Mostly, the interest rate goes higher for FDs of a longer tenure. There can be an exception as the banks set the Fixed Deposit interest rate based on their anticipation of the repo rate (the interest rate at which Banks borrow the money from RBI). If a bank expects that the repo rate might rise after 5 years, the FDs with higher tenure (over 5 years) will have a lower interest rate than the one with a lower tenure.
Get Guaranteed Returns.The returns are guaranteed on the fixed deposit investment. Irrespective of the amount deposited in FD, it will always earn you the interest that exists at the time of making the deposit. Market fluctuations will impact the returns on the investment. This may be a reason why most experienced investors still like to keep a part as an investment in fixed deposits.
A Great Help in Urgent Cash Situations.In an emergency situation, the fixed deposit can easily be broken and the money can be withdrawn to use as cash in hand. Banks can charge a small amount as a penalty for breaking a Fixed Deposit before the maturity. Though, it is not a smart option to opt for. One can opt for a loan against Fixed Deposit instead of breaking the FD before the maturity date. The interest earned on the FD reduces the interest outgo on the loan. Additionally, the customers do not have to pay any penalty, among others expenses that come up with the loan process.
Joint Fixed Deposits:Many people do not know that they can invest in a Fixed Deposit along with their spouse, children or parents. However, it is important to remember that in case of premature withdrawal or an application for a loan against Fixed Deposit, all FD holders have to sign the loan/ withdrawal application form.
Higher Interest Rates for Senior Citizens: A primary reason why Fixed Deposit is so popular among senior citizens is because of the higher interest rates and the returns they can avail. The rate is generally higher for FDs as compared to savings accounts and the rate of interest for senior citizens is also higher (at least 0.50%) as compared to other bank customers.
Loan Against Fixed Deposit:In an urgent need of money, it is easy to borrow a loan against the Fixed Deposit. The customer can avail up to 90% of the principal amount of the fixed deposit. The customer continues to earn interest even the loan is availed against the FD. This interest helps to repay the loan more easily.
