There are various investment options available in the Indian financial market currently. These range from market-linked schemes like mutual funds and stocks to fixed income products like fixed deposits, savings accounts, etc.
Investors often look for schemes that offer maximum return with minimum risks over the tenor. Schemes that are market-related often fail to meet this requirement because of their dependency on the unstable financial market. It is one of the main reasons why FDs and savings accounts have become two of the most preferred investment options in India. Amongst these two, fixed deposits offer the highest interest rate, guaranteed returns, and flexibility to increase one’s financial asset quickly.
Fixed deposit is a term deposit scheme offered by various financial institutions including NBFCs. It is a high-yield investment option; meaning, the investor can expect a guaranteed return when the plan matures.
There are several reasons why FDs are considered the best low-risk investment. Seven of them are mentioned below:
The rate of interest is high
Fixed deposits offer a significantly higher rate of interest than other low-risk FD investment schemes. Companies like Bajaj Finserv offer an attractive rate of 8.75% on their Fixed Deposit. Such high interest rate allows you to accumulate more return and grow your savings with ease.
It is independent from market fluctuations
FDs are not affected by the fluctuations in capital markets and are independent of interventions from RBI. The interest rate is fixed whenever you apply for an FD and remains unchanged throughout the scheme’s maturity period even if the repo rate changes.
One can enjoy tax benefits
You can earn tax exemptions with a fixed deposit if your total income is lower than the minimum amount specified in the tax slab. An eligible applicant has to submit Form 15G to their financial institution to apply for the tax reduction.
One can avail a loan against the investment
You can apply for a secured loan against your FD in case of an emergency. Financial organisations usually sanction up to 75% of the FD amount. Repayment tenor of these secured loans ranges up to the maturity date of your fixed deposit. Such credits can help you tackle a financial crisis without liquidating your term deposit and paying a premature withdrawal charge unnecessarily.
Senior citizens can enjoy special benefits
Companies like Bajaj Finserv offer an additional interest rate of up to 0.35% for senior citizens when they apply for a Fixed Deposit. It helps them increase their savings by a significant margin within a short time span.
FDs are convenient
Unlike most other investment schemes, FDs do not require a periodic deposit of funds throughout the scheme’s tenor. You only have to deposit the money while opening the account and it will be locked in for the tenor period. You can invest as low as Rs. 25,000 in an FD account.
It offers flexibility
You can customise the FD scheme according to your requirement. A flexible tenor of 12 to 60 months allows you to lock-in the funds as short or long term investments.
Therefore, fixed deposits are an excellent option meant for anyone looking for a guaranteed high-return investment scheme. It has a much higher potential to maximise your wealth compared to any other types of investments.