• Which Bank Is Best For Fixed Deposit 2021

    Finding the best Fixed Deposit (FD) scheme is very important to get the best returns out of your investment. To choose the right FD scheme, you need to consider certain factors before applying for a term deposit. It is wise to consider factors like interest rate paid, credibility of the bank or financial institution offering the FD, total yield, interest compounding frequency, etc. In india, FDs are offered by both banks and Non-Banking Financial Companies (NBFCs). NBFCs or corporate company FDs usually pay a higher rate of interest on time deposits when compared to banks.

    It is necessary to do some research before you put your hard-earned money in a fixed deposit scheme. In this page, you can read about how you can choose the best FD scheme.

    How to Choose the Best Fixed Deposit?

    The following are the factors to consider before applying for an FD:

    • Interest: One of the most important factors to take into account before choosing an FD scheme is the rate of interest that is paid. It vital that you compare the rate of interest offered by several banks before opting to invest in the FD scheme.
    • Loan: Certain lenders allow you to avail a loan against the amount that is available in the FD account. You can consider to open an FD account with such a bank in case you require funds.
    • Bank’s Credibility: The credibility of the bank is an important factor that must be considered before you invest in the FD scheme. Preferably, you can go for ‘A’ rated schemes and consider rating from organisations like ICRA and CRISIL.
    • Premature Withdrawal: It is important to select a bank that offers the premature withdrawal facility when you invest in an FD scheme. The premature withdrawal facility will allow you to withdraw the money in the case of any emergencies. However, a penalty may be levied in the case of premature withdrawal.
    • Cumulative Deposits or Non-Cumulative Deposits: In case you opt for cumulative deposit, the interest is paid at the time the FD matures. In the case of a non-cumulative deposit, the interest is paid either annually, half-yearly, quarterly, or monthly.
    • Bank or Non-Banking Financial Company: NBFCs usually offer FD schemes that come with a minimum tenure of 1 year. However, most banks offer FD schemes that come with a minimum tenure of 7 days.
    • Penalty Rates: It is vital that you check the fee that will be levied in the case of premature withdrawal before you invest in the FD scheme.

    Bank Fixed Deposits

    Bank fixed deposits, one of the most sought-after savings schemes for millions of investors in India, offer higher rates of interest than savings bank accounts. The rates of interests for fixed deposits vary depending on the bank. Bank fixed deposits are regulated by RBI, which guarantees up to Rs.1 lakh against insolvency of the bank. Bank fixed deposits typically offer lower interest rates compared to corporate fixed deposits but provide assured returns.

    How to Choose a Good Bank Deposit Scheme?

    • Unlike corporate fixed deposit schemes, bank fixed deposits schemes are not dependent on ratings.
    • Experts suggest sticking to PSU banks or select private sector banks for safe returns.
    • Investors should consider several parameters such as maturity amount, interest, interest after tax and inflation-adjusted returns among others.
    • You need to zero in on the amount to be held in a fixed deposit in addition to the deposit period.
    • Different banks offer varied interest rates and tenure. Investors need to make a comparative analysis prior to depositing money in a fixed deposit.
    • You have to study the premature withdrawal clauses which vary from bank to bank.
    • Different banks offer several fixed deposit schemes

    Top banks offering high interest rates on FDs

    The table below shows the banks the offer the FD scheme at high interest rates:

    Banks Interest Rate Tenure (p.a.)
    India Post Office 5 years 6.70%
    Jana Small Finance Bank Above 3 years – Less Than 5 years 6.75%
    Jana Small Finance Bank Above 1 years – Up to 3 years 6.50%
    Jana Small Finance Bank 1 year 6.25%

    How to Choose a Good Company FD Scheme?

    • Check the promoters' history, company's repayment record and balance sheet among others. In some cases, a company with a low credit rating is more likely to offer higher rates to attract investors.
    • Investors should avoid companies which offer more than 15% interest rate, companies not paying regular dividends to the shareholder besides partnership firms since it is difficult to ascertain their performance.
    • Investors should stay away from unrated deposit schemes by small manufacturing companies. Only 'A' rated NBFCs are eligible to accept deposits as mandated by RBI. Investors should look for AA or AAA rated companies with enjoy good reputation.
    • Longer the duration of investment, higher is the rate of interest offered. But you should be cautious about investing for a longer duration. It is more advisable to go for shorter duration deposits of around 1 year to 3 years to monitor company's rating and servicing.
    • Experts suggest diversification and investing in several good schemes rather than in just one scheme.
    • Investors should analyze the servicing standards of the company and consult the investment advisor for all transactions.
    • Investors should not only review a company’s profile but also its ratings. Ratings are given by credit rating agencies such as ICRA, CRISIL and CARE
    • Investors should also examine the lock in period of the deposit. Most deposit schemes have an initial lock-in of three to six months.
    • Investors should be wary of default risk, i.e, at maturity, companies may not return the amount and default (owing to bad performance and recession among others).
    • While bank deposits are secured by RBI, company deposits have no such back-ups and are, therefore, unsecured.

    Top Rated Company Deposit Schemes in India

    Company Rating
    Mahindra & Mahindra Finance Serv Ltd CRISIL – FAAA
    ICICI Home Finance Co. Ltd AAA By CRISIL, ICRA, and CARE
    LIC Housing Finance Limited CRISIL – FAAA (Stable)
    HDFC Limited FAAA By ICRA and CRISIL
    Bajaj Finance Limted FAAA (Stable) by CRISIL and MAAA by ICRA

    FAQs on How to Choose the Best Fixed Deposit

    1. I want to open a fixed deposit (FD) account with a certain bank. Should I have a savings account with the lender?

      Yes, you will need to open a bank account with the lender to open an FD account with them.

    2. Is there a nomination facility available if I open an FD account?

      Yes, most banks in India offer nomination facilities on opening an FD account.

    3. Can NRIs open FD accounts in India?

      Yes, an NRI can open an FD account in their name in India. They can open an NRE or an NRO account based on their preference for the currency in which they would prefer to deposit the amount.

    4. Can I avail loan against fixed deposit facility if the account is in the name of a minor?

      No, you cannot avail loan against fixed deposit facility if the account is in the name of a minor. Once the minor turns 18 years old, he/she can then avail the facility.

    5. Is Tax Deducted at Source (TDS) applicable on opening an FD account?

      No TDS is deducted for interest earned up to Rs.10,000. Submit Form 15G or 15H at the time of opening an FD account if your total income is lower than the taxable limit.

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