How to Get the Best Fixed Deposit Interest rates for Your Investment

Also known as Term Deposit, Fixed Deposit(FD) is a form of investment that offers its investors better interest rates than Savings Account to the date of maturity. The interest is fixed, so the investor knows how much they stand to get at the end of the investment.

The fixed deposit tenure ranges from seven days to ten years. Some banks offer fixed deposits for as long as 20 long years. Even though fixed deposits offer higher interest rates, you cannot withdraw your deposits before the maturity period. But there are ways you can withdraw your money in the middle after due process. Keep this as a last option, and only in the case of emergency.

Fixed Deposit Interest

Interest varies from financial institution to institution. This is stipulated by the norms of the RBI. Companies have their FD interest calculators on their websites. Here, the investor can check with the Interest rates on a monthly, quarterly, half-yearly or yearly basis and calculate the amount based on the Principal amount invested.

Generally, a formula is followed

A = P × (1 + r/n)nt

A is final amount

P is Principal Amount

r is annual interest rates

t is number of years

n is number of years of compounding

Let us assume that you have Rs.50,000 deposited as a FD for a period of 2 years with an annual interest rate of 5% which is compounded quarterly .

Know How to Use Online FD Calculator

Based on the formula above, you’ll get Rs. 55,224 giving you a profit Rs.5,224.

Best Interest Rates in India

The best interest rates for a FD in India is offered by a bank is 7.50% for a deposit to period of 241 to 364 days. Almost all interest rates for FD hovers around 7% there could be a variations

based on the term of the deposits from one institution to the other. The Government bank benchmark is 5.50% - 7 % and the private bank bench mark is 4% - 6.50%.

Fixed Deposit Rates Comparison

FD interest are always governed by the RBI and the rates may vary according to the rules prescribed by it. There are also other factors that affect the interest rates like recession and inflation. Taking all this into account, the current rate for fixed deposits 6.25% - 9.25% offered by banks. The highest interest rates 9.50% - 10.00% were offered in the 2000-01.

Fixed Deposits in India

Post Demonetization, banks received huge cash deposits. As a result, the interest rates have reduced. Going by the policies of the Government, it is going to be cashless transactions for the most part. This means that there are less cash transaction, so money will be stored in banks for the most part. It’s always better for you to invest money than keeping it idle in an account. You can have some liquid cash for expenses and the rest can be invested in Fixed Deposits.Take a look at other investment options to diversify your portfolio.

Are Fixed Deposits Safer?

It is a best investment option for an individual who is averse to the risk of other investment options.. Your investment is locked for the period you have opted for, and it gives you a disciplined approach to your investments. You have to pay a penalty if you wish to withdraw the amount invested.

Read Also: How to Make Your Fixed Deposit Yield More Returns