Investing in fixed deposits offers you stability and assurance on the safety of your principal amount. But when you plan to invest in the FD, there is the question of choice to understand which bank to select.
But knowing which bank is best for a fixed deposit is not enough. You must also know the details of the NBFCs, as at times they offer you better returns. So, now the question is, how can you get all the fixed deposit information?
Well, if that is the case, then read this guide and get all the details you need about the fixed deposits. Ensure to analyse these aspects well so that you make an investment that offers you higher returns, stability, and growth. Also, these details can help you become an advisor on fixed deposits and earn a good income.
What Is a Fixed Deposit?
A fixed deposit is a savings instrument offered by banks and NBFCs where you deposit a lump sum for a fixed tenure and earn a predetermined interest rate. Unlike market-linked investments, the returns remain stable throughout the period.
The primary reasons why many people still prefer FDs over other investment instruments are:
- Safety of the funds you invest.
- A fixed rate of return.
- Comparatively higher liquidity.
- No risk involved.
- Varied payout options.
Now, before you plan to invest, there are certain basic fixed deposit information to know. The primary ones are the tenure, interest rate, and payout frequency.
How Does a Fixed Deposit Work?
A fixed deposit works by locking your money for a chosen tenure while the bank or NBFC pays interest at a fixed rate. The interest may be calculated using simple interest for very short tenures or compound interest for most standard FDs.
Simple Interest FD Calculation
Short-term deposits may use simple interest, where interest is calculated only on the original principal.
Formula
I = (P*R*T)/100
Where:
- I = Interest earned
- P = Principal amount
- R = Annual interest rate (%)
- T = Time in years
Then, to get the actual value at the end of the year, you add this interest to your initial invested amount.
Example
Now, say you invest ₹1,00,000 at 6% interest for 2 years. Then the formula will be like this:
I = (1,00,000 * 6 * 2)/100 = ₹12,000
So, once the 2 years are complete, the actual value of the FD will be ₹1,12,000.
Compound Interest FD Calculation
Most banks in India calculate FD returns using compound interest. It is compounded quarterly in general. This means interest is added to the principal periodically, which increases total returns.
Formula
A = P [1 + {R/(100*n)}]^(n*T)
Where:
- A = Maturity amount
- P = Principal amount
- R = Annual interest rate
- n = Compounding frequency per year
- T = Tenure in years
Example
If you invest ₹1,00,000 at 7% for 3 years with quarterly compounding, then the value will be as follows:
A = 1,00,000 [1 + {7/(100*3)}]^(3*4)
So, the maturity amount will be around ₹1,23,140, which means you have earned an interest of approximately ₹23,140.
Fixed Deposit Interest Rates in India
FD interest rates in India vary depending on the bank type and tenure. Most banks offer their highest rates between 1 and 5 years, while senior citizens usually receive an additional 0.25% to 0.50% interest benefit. The table below shares some of the key rates:
| Bank / Institution | Type | General Citizens (p.a.) | Senior Citizens (p.a.) |
|---|---|---|---|
| State Bank of India | Public Sector Bank | Up to 6.45% | Up to 6.95% |
| Bank of Baroda | Public Sector Bank | Up to 6.30% | Up to 7.00% |
| Punjab National Bank | Public Sector Bank | Up to 6.90% | Up to 7.40% |
| HDFC Bank | Private Bank | Up to 6.45% | Up to 6.95% |
| ICICI Bank | Private Bank | Up to 6.50% | Up to 7.10% |
| Axis Bank | Private Bank | Up to 6.45% | Up to 7.20% |
| IndusInd Bank | Private Bank | Up to 7.00% | Up to 7.50% |
| IDFC First Bank | Private Bank | Up to 7.00% | Up to 7.50% |
| Suryoday Small Finance Bank | Small Finance Bank | Up to 7.90% | Up to 7.90% |
| Bajaj Finance | NBFC | Up to 6.95% | Up to 7.30% |
| Shriram Finance | NBFC | Up to 7.60% | Up to 8.10% |
| Muthoot Capital | NBFC | Up to 9.10% | Up to 9.35% |
Note: This is just a snapshot and potential rates. There might be a difference in the actual ones. So, check with the expert before investing.
Bank Vs NBFC Fixed Deposits: Key Differences
When evaluating which bank is best for a fixed deposit, you must look for all the details. So, here are the key points to know:
| Factor | Bank Fixed Deposits | NBFC Fixed Deposits |
|---|---|---|
| Regulation | Regulated by the Reserve Bank of India (RBI). | Regulated by RBI but with different deposit rules. |
| Safety | Comparatively safer. | May carry a higher risk. |
| Deposit Insurance | Covered under DICGC insurance up to ₹5 lakh. | Usually not covered by deposit insurance. |
| Interest Rates | Moderate interest rates. | Often higher to attract investors. |
| Liquidity | Easier premature withdrawal. | Withdrawal rules may vary by issuer. |
| Reputation Factor | Large banks offer stronger credibility. | Depends on the NBFC’s credit rating. |
| Ideal For | Investors prioritising safety. | Investors seeking higher returns with moderate risk. |
How To Choose The Best Fixed Deposit
Having the right fixed deposit information can help you make the right call. Some of the key points that you should consider while selecting are:
1. Check Interest Rates
Do check the rates with all the banks and NBFCs. At times, there will be some small difference in rates even when tenure is the same. This will still impact your returns greatly.
2. Evaluate Safety And Credit Rating
Large banks and highly rated NBFCs are way better. They generally offer better security for deposits. They have better credit ratings, which helps the investors stay safe. So, this should be a point of concern as well.
3. Choose The Right Tenure
Select a tenure that matches your financial goal. Short-term FDs are useful for liquidity. But if you wish to generate some wealth, go for a longer duration.
4. Look At Interest Payout Options
Some FDs pay interest monthly or quarterly. So, if you are looking for a regular source of income, you must select an FD that offers you the same. This small choice can make a big difference.
5. Check Premature Withdrawal Rules
Some banks allow early withdrawal with a small penalty, while others may restrict it. Reviewing these rules will help you avoid any situation that can impact your returns.
Conclusion
Fixed deposits remain one of the most reliable options. These are known for being stable and for offering predictable returns. While large banks offer stronger safety and credibility, small finance banks and NBFCs may provide higher interest rates. So, the choice should be based on both safety and interest rate.
For those who are looking for a good FD investment option, check with the advisors at Choice Connect. Ensure you get all the details with these professionals and move through your financial journey well.
FAQs
Can I open an FD without going to the bank?
Yes, you can open the FD online. This facility is now offered by most of the banks and even the NBFCs.
Which bank fixed deposit is best in India?
The best FD depends on your priority. If you want stability and safety, then large banks work the best. If you want higher returns, then small banks and NBFCs are better.
Is FD 100% safe?
Fixed deposits are considered low risk. This is when you start FD with a reputable bank. But in certain adverse cases, you might face an issue with your FD when the bank faces problems.
What makes a good FD?
A good FD offers competitive interest rates, flexible tenure options, strong bank credibility, and convenient withdrawal or renewal features that match your financial goals.
Can NRI put FD in India?
Yes, NRIs can open fixed deposits in India through NRE, NRO, or FCNR accounts. This allows them to earn interest on their foreign currency or Indian currency.
