As the condition of the economy is not smooth and stable, many investors have started investing heavily in fixed income instruments. Fixed deposits being a popular investment option in India, investors are taking quite an interest in depositing bulk amounts in different types of FDs. However, if you compare the interest across banks, finance companies, and other financial institutions, you will notice a steady decline in FD rates. Apart from the market forces, many other factors can impact or influence the FD returns in India. Some of these factors are listed below:
Investment tenor
It’s you who decides the tenor for which you want to lock in your investment and a higher tenor usually means a higher interest rate for your deposits. Therefore, it is recommended that you deposit in longer tenor FDs to earn maximum returns upon tenor completion.
Type of FD
The type of FD in which you invest can also determine the FD interest rate. For instance, if you invest in a non-cumulative FD, you will withdraw some interest periodically and the principal amount that will be taken into account during the consequent interest calculation cycle will not include this interest amount.
Therefore, the increase in interest payout frequency will reduce your interest gains slightly. To avoid this, you can invest in a cumulative FD and earn higher returns at maturity.
FD issuer
As you know that bank FD rates are not high enough, you can select a corporate FD that might be providing a high FD rate. For example, Bajaj Finance is offering an interest rate of up to 6.75% which is one of the best interest rates in the FD market as of now. As a result, you can see that picking an FD issuer smartly can also impact your chances of earning higher returns.
Suppose that you invest Rs. 15,00,000 in a bank FD for 5 years and choose the same tenor and amount for investing in a Bajaj Finance FD. The returns that you can expect after 5 years are given in the below table:
| Fixed Deposit Plan | Principal Amount | Tenor | Interest rate | Interest gains | Maturity Amount | Growth in savings (%) |
| Bank FD | Rs. 15,00,000 | 5 years | 5.5% | Rs. 4,71,100 | Rs. 14,71,100 | 31.40% |
| Bajaj Finance FD | Rs. 15,00,000 | 5 years | 6.75% | Rs. 5,79,365 | Rs. 15,79,365 | 38.62% |
Therefore, you can observe that the returns offered by Bajaj Finance FD are much higher than a regular bank FD. For experimenting with other combinations of tenor and amount, you can use a fixed deposit calculator.
Customer category
Some financiers offer better interest rates to their customers based on their age or any other factor. For instance, Bajaj Finance offers a 0.25% higher FD rate to their customers who are above 60 years old whereas online investors who are less than 60 years are eligible for a 0.10% higher FD rate.
To negate the impact of changing interest rates on your deposits, you can ladder them in such a way that multiple maturity points in a year give you higher liquidating opportunities. It will not only even out the impact of changing FD rate of interest but you will also be presented with a chance of consolidating or reinvesting your returns in a high-paying FD when the rates increase again.
The multi-deposit provision that you get on investing in Bajaj Finance FD, is specially created for those who are interested in laddering FDs. Through this provision, you may prefer to invest in multiple FDs at once and the lock-in periods, fixed deposit type, and amount can vary for every deposit. Also, you don’t have to pay for each deposit separately as submitting a single cheque against all the FDs would be enough.
Bajaj Finance FD is also regarded as a stable and secure investment proposition for investors and that can be validated by checking the high credit ratings that credit rating institutions like CRISIL and ICRA have bestowed to this FD instrument.
Author Bio
Gaurav Khanna is an experienced financial advisor, digital marketer, and writer who is well known for his ability to predict market trends. Check out his blog at Highlight Story.