Fixed Deposit Schemes in India

In order to generate maximum returns out of an investment, it is essential to find the ideal fixed deposit (FD) scheme. There are a number of factors, which need to be considered before applying for an FD. Non-Banking Financial Companies (NBFCs)pay high FD rates as compared to banks. It is important to do some research before you put your money in an FD in India.

Factors to consider while choosing an FD

You need to keep the below-mentioned factors in mind when applying for an FD.

1. Interest rate

The most important factor to take into consideration is the FD interest rate. Choose a good deal by comparing the interest rates because it will make a huge difference to the returns generated on your investment.

2. Tenure

Another factor to consider is the tenure. If you want to earn maximum return from your investment, you need to remain invested until the maturity period. Hence, choose the tenure wisely.

3. Interest payout option

After comparing the FD rates in India, you will have to decide on the payout option. Consider the period when you would like to receive the interest. It could be monthly, quarterly, annually or half yearly.

4. Penalty rates

Before you put your money in an FD, you need to check the penalty rate in case you want to break the deposit prematurely.

How to choose a good FD scheme

In order to select the most suitable company FD scheme, you need to follow certain below-mentioned steps to ensure that you make the correct choice.

• Check the repayment history and verify the NBFC’s background. Many times, a company with a low credit rating offers high-interest rates in order to attract investors.
• Do not simply make a decision by looking at the fixed deposit interest rates. Conduct research about the financial institution before you put your money. Avoid companies, which offer more than 15% rate of interest.
• Stay away from unrated deposit schemes by companies. Instead, only look for AA or AAA-rated companies as they have a credible reputation.
• Start with a shorter period of one-three years. Investing for a longer period will provide you with a higher interest rate. However, while investing in an FD for the first time, you must be cautious by monitoring the NBFC’s services during the tenure.
• Diversify your portfolio and invest in a few good schemes rather than a single scheme.
• Review the profiles of the financial institutions along with their ratings. The ratings are given by agencies like CRISIL and ICRA.
• Understand the lock-in period of an FD scheme. Majority schemes have an initial lock-in period of three to six months.

FDs are considered as a traditional and secure investment option. They are low risk and generate consistent returns in the form of interest. Before you invest your money in an FD, understand the terms and conditions of the same. Make a wise choice and do not be simply driven by the rate of interest.