There are many investment options for people living in India. They can invest in term deposits, trade stocks, buy mutual fund units, invest in PPF or SCSS, etc.
If there is one investment instrument that has held its ground amidst economic upswing or downswing, it is a fixed deposit. A fixed deposit allows you to park the extra money in your wallet to get secured returns and fulfil your life goals.
Here are the reasons that make fixed deposits a preferred choice for millions of Indians.
In India, the following four types of financial institutions offer fixed deposits:
- Licensed commercial public sector and private sector banks
- Small finance banks
- Housing Finance Companies (HFC)
- Non-Banking Financial Companies (NBFC)
In terms of FD interest rates in India, banks usually offer the lowest rates, followed by small finance banks and NBFCs. But, if you want to receive the best FD rates in India, you may have to depend on HFCs like PNB Housing Finance. HFCs, like NBFCs, are licensed by the RBI and approved by the Ministry of Corporate Affairs. Hence, investments with HFCs are as safe as banks.
In an age where interest rates are continually decreasing, HFCs provide inflation-beating FD rates in India. For example, PNB Housing Finance offers an interest rate of 6.70% (with a gravity-defying yield to maturity of 9.13%) on 10-years’ fixed deposits.
Hence, a fixed deposit can allow you to fulfil your financial goals by giving you a higher income than the current inflation rates.
Unlike investments in high-return government saving schemes like PPF or SSC, fixed deposits are one hundred per cent liquid. Hence, you can withdraw the entire amount any time you face a cash crunch.
Often, people keep money in their savings account to meet short-term financial needs. However, by parking your money in a savings account, you earn not only lower interest rates but also sacrifice the power of compounding. A fixed deposit, on the other hand, enables you to get higher returns with complete freedom to withdraw the money whenever the need arises.
Sometimes, people use a fixed deposit for hedging purposes. To reap benefits from the hedging strategy, you can invest a sum of money in high-risk high-return financial instruments like equity or bonds and another part in low-risk high-return instruments like fixed deposits.
When you hedge your portfolio with a fixed deposit, you reduce the probability of losing your hard-earned capital. Thus, you can earn irrespective of whether the market goes up or down.
You can choose two types of fixed deposits – cumulative and non-cumulative. The non-cumulative mode allows you to get an interest every month. Alternatively, you may choose the quarterly, half-yearly, or annual mode. However, if you want the best FD rates in India, it is wise to select a cumulative fixed deposit. Generally, you can get more interest if you opt for a long-term fixed deposit.
Hence, a cumulative fixed deposit increases your capital much faster than a non-cumulative FD.
To get the best FD rates in India, you have to look beyond the ordinary. Housing finance companies like PNB Housing Finance offer FAA+ rated fixed deposits with 6.70% interest. If you want to keep your money safe and still earn higher returns, nothing can beat a fixed deposit.