Fixed Deposits are considered a safe and prudent investment opportunity in India as you will be getting guaranteed returns over a certain period.
In this write-up, we are going to illustrate the main points that explain why investing in a Bank FD is a smart choice with guaranteed returns:
What is the role of fixed deposits in an investment plan?
- A bank Fixed Deposit (FD) is widely considered an essential part of your financial portfolio.
- The returns earned are used in our society by all income segments and is the best way to achieve financial security. This option exists independently of any other investment plan.
What are the advantages and disadvantages of investing in a Bank FD?
- It is safe to say that fixed-income savings bonds offer limited returns, and, while these returns are very secured, the total returns an investor earns are not significant for investors who have a high-risk appetite. The reason for returns being not that significant is that fixed deposits are low-risk investments with a focus on security and stability and not on the volume of returns. The main drawback of fixed-income instruments is that they are not suitable for high-risk investors, who expect higher returns on their investments.
- The most significant advantage of fixed deposits is the level of security they offer. If you set up a fixed-deposit investment, you have a lock-in period in a fixed interest instrument. This effectively ensures that your principal amount is securely deposited for a set period and that you earn the returns based on the interest offered by the financial institution.
- As the deposit is a non-market linked instrument, there is no risk of market-related problems, and therefore the safety of your investment is guaranteed. However, as it is an investment, it carries some risk in the event of a financial crisis.
- Fixed Deposits has a credible market value (cash value). This means you can get a loan by applying against your investment deposit and getting it if you need it immediately.
- The essential feature of Bank FDs is also that the investor can always withdraw an amount of 90% of the money invested in the deposit. This feature allows the funds to cover emergencies, if necessary, with funds from the bank account.
What is the ideal period for investing in Bank FDs?
- The investment conditions and the time limit for depositing into the account are incredibly flexible and vary between 6 – 7 months to about 10 years.
- This means there is no fixed or mandatory lock-in term period, and you can choose the term of your investment according to your specific needs.
Points to remember
- Fixed deposit investments are part of a diverse financial portfolio that serves the interests of the low-risk investor group and provides the necessary security of funds and guaranteed returns.
- Although term deposits offer attractive returns, they may not be ideal for those who seek high or significant returns over a certain period.
- Having term deposits is a must as per the risk appetite of any investment plan after carefully considering your financial goals and choices. Therefore, Fixed Deposits are an essential part of a diverse financial portfolio.
Popular FD schemes offered by various banks and NBFCs
| Bank | FD Tenure | Interest Rates |
| SBI Bank Fixed Deposit | 7 Days – 10 Years | 2.90% – 5.40% |
| HDFC Bank Fixed Deposit | 7 Days – 10 Years | 2.50% – 5.50% |
| ICICI Bank Fixed Deposit | 7 Days – 10 Years | 2.50% – 5.50% |
| Axis Bank | 7 Days – 10 Years | 2.50% – 5.50% |
| ICICI Home Finance | 12 Months – 120 Months | 6.00% – 6.50% |
Conclusion: Investing in Bank fixed deposits is a safe and secure way of ensuring your fiscal goals. They are an essential part of any complete investment plan providing the option of liquidity for emergencies and assured returns over a period.