Despite the lowering of fixed deposit (FD) interest rates following a spate of cuts in the repo rate by the Reserve Bank of India in recent months, these timed deposits still continue to remain one of the most favourite investment instruments in the country. Their low-risk nature, high liquidity, investment clarity and investment ease make FDs a hit among investors across various risk appetite categories. And when it comes to choosing an FD account, many investors prefer government banks over private banks or small finance banks for an additional layer of security.
That being said, the fact remains that FD rates have seen a consistent decline in the last few months which has disappointed some investors. Besides, the tax on FD returns further decreases the actual returns. But at a time when capital protection has become as important as capital appreciation, you’ll still be well-advised not to look away completely from FDs. Risk-averse investors can, however, implement what is called a laddering technique to maximise the returns while keeping the overall investment risk under control.
According to BankBazaar, laddering is an investment technique under which one or more investment products with different maturity periods are used to create an investment loop. In the case of FD laddering, you can use different FD instruments with different maturities to invest your money. Instead of investing your entire corpus in a single FD, divide your fund equally and invest it in fixed deposits with different maturities to average out any interest rate fluctuation in the long term.
You may also want to limit your deposits to Rs 5 lakh per bank as that much is insured by the Deposit Insurance and Credit Guarantee Corporation, a Reserve Bank of India subsidiary, in case a bank fails. However, it must be noted here that no commercial bank in India has ever lost its depositors’ money.
For higher returns with greater risk, you can consider investment instruments like small savings schemes, corporate FDs, mutual fund SIPs and even Sovereign Gold Bonds after carefully evaluating your returns expectations, risk appetite, and liquidity requirements. When in doubt, don’t hesitate to consult a certified investment advisor, BankBazaar says.
If you’re looking to invest in fixed deposits, here are the top 10 government banks — including the State Bank of India, Punjab National Bank and Bank of India –with the highest interest rates this week with tenures between 1 and 3 years. Make a decision after carefully comparing your options.
Date compiled by BankBazaar.com
Disclaimers:
# Data as on respective banks’ website on 30 Jun 2020
# For each year range, the maximum offered interest rate is considered; interest rate is for a normal fixed deposit amount below Rs. 1 crore.
# Only main entity of the merged banks are taken. Banks which merged with its main entity are removed from the table
