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    How to choose the best FD scheme

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    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:

    • Rate of interest paid: One of the most important factors to take into account before choosing an FD scheme is the rate of interest that is paid. All investors must compare FD interest rates and choose a good deal.
    • Credibility of FD provider: Do not just blindly go for the FD with highest interest rate. There are other factors that also need to be considered like the credibility of the organisation that is offering the term deposit. Preferably, go for ‘A’ rated schemes and consider rating from organisations like ICRA and CRISIL.
    • Tenure: Another factor that determines the rate of return of your investment is the duration for which the investment is held.
    • Interest compounding frequency: Find out how the interest is calculated on your investment. If you choose to reinvest the interest that you earn, the total return on the investment will be much higher.
    • Interest payout option: See if the FD you are investing in gives you a wide range of interest payout options. Take a look at the frequency on interest payouts. In most cases payments are made monthly, quarterly, annually or half-yearly.
    • Penalty rates: The other thing to check before putting your money in an FD is whether there is any fee levied in case you want to prematurely break your deposit.

    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

    • Bajaj Finance Ltd: Bajaj Finance Limited has good credit ratings from ICRA and CRISIL. They offer an interest rate of up to 8.10% for senior citizens, 7.85% for new customers and 7.95% for existing customers. These interest rates are applicable for deposits held for 3 years and above. The best part about this FD scheme is that customers get an additional 0.10% hike in interest rate for FD renewal. The minimum investment amount is Rs.25,000.
    • DHFL Aashray Deposit Scheme: This is a certified deposit scheme that offers an interest rate of 7.70% of all investments made for a tenure 1 year. There are both cumulative and non-cumulative deposits to choose from. The minimum deposit amount under this scheme is Rs.2000.
    • GRUH Finance Ltd: Rated by both CRISIL and ICRA, GRUH Finance limited pays interest at the rate of 7% to 7.5% on all deposits. They offer both cumulative and non-cumulative deposits. Read more for GRUH Finance Fixed deposit rate.
    • HDFC Premium Deposits: This is a good rated FD scheme that pays interest in the range of 7% to 7.5%. There are a wide range of options that an investor can choose from including investment amount and different interest payout options.

    The following table shows details of the top rated corporate fixed deposits:

    Company Rating Period Rate of Interest
    Bajaj Finance Ltd FAAA by CRISIL, MAAA by ICRA 3 years and above 7.85%
    DHFL Aashray Deposit Scheme AAA by CARE and FAAA by BWR 1 year 7.70%
    GRUH Finance Ltd FAAA by CRISIL, MAAA by ICRA 1 year 7.25%
    HDFC Premium Deposits FAAA by CRISIL 15 months 7.15%

    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 high interest rates offered by some banks on fixed deposits:

    Name of the bank Duration Rate of interest
    Bandhan Bank 1 year to less than 2 years 7.15%
    RBL Bank 1 year to less than 2 years 7.10%
    Repco Bank 1 year to less than 2 years 7.25%
    IDFC Bank 1 year and 1 day 7.5%
    Lakshmi Vilas Bank 725 days 7.25%
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