One way to maximise FD returns would be to invest in the deposits of small finance banks which are currently offering 2-4% higher interest rates compared to public and private banks.
The Reserve Bank of India has reduced the repo rate by 225 basis points since the beginning of 2019 to the current 4%, something that has directly impacted the interest rates of fixed deposits. Now, assured returns, investment ease and forced savings make these bank deposits one of the most popular investment instruments in our country. In fact, countless risk-averse investors like senior citizens depend upon the monthly payouts of their non-cumulative fixed deposits for their day-to-day expenses during their post-retirement years.
It’s understandable that the lowering of FD interest rates would be a cause of major concern for the investors as their FD returns could be proving to be insufficient to meet their various financial goals on time. However, one way to maximise FD returns would be to invest in the deposits of small finance banks which are currently offering 2-4% higher interest rates compared to public and private banks, according to BankBazaar.
Investors, however, would be well advised to scrutinise the financials of these small finance banks before finalising their investment decision for a thorough risk assessment. Investors could also make use of the FD laddering technique by investing in multiple FDs in different banks with different tenures and keep re-investing them on maturity, if feasible, to benefit from higher interest rate offers in the future. Another advantage of creating this investment loop is that it ensures higher investment liquidity as it decreases the chances of pre-closing an FD to meet an unexpected requirement after losing interest income.
The higher FD interest rates offered by the small finance banks could also help in earning a higher actual return as FD income is taxable according to the applicable income tax slab rate, informs BankBazaar.
So, if you are planning to invest in an FD with a small finance bank — such as Fincare Small Finance Bank, Ujjivan Small Finance Bank, Jana Small Finance Bank and Suryoday Small Finance Bank — here are the interest rates they are currently offering.
FD Rates Currently Being Offered By Small Finance Banks
Disclaimer: Data as on respective banks’ website on September 29, 2020. Interest rate is for a normal fixed deposit amount below Rs 1 crore. Compiled by BankBazaar.com