Why Do Indians Prefer to Invest in Fixed Deposits?

Indians prefer FDs as they offer assured and safe returns on their investments. For most of us, it is a traditional investment to keep a savings portfolio in FDs. As per a SEBI survey in 2019, 95% of the Indian families preferred bank FDs, and less than 10% were keen to invest in Mutual funds, and Stocks. FDs can be opened in banks, post offices, and NBFCs. If you open a bank FD Account, you will easily understand the best fd rates that you get on your fixed deposits as per your FD tenure.

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By investing in tax-saving FDs you can save up to Rs 1.5 lakh per year u/s 80C of the Income Tax Act. The returns are provided on both annual and monthly basis as per your preference. To make it easier for you there are fixed deposit calculators that help you check monthly returns on your Fixed Deposit.

Monthly Interest Payout on FDs

The interest earned on bank FDs is higher in comparison to the savings account. 

All the banks in India have a provision to open a fixed deposit account. FD Account can be opened online without visiting the branch, especially during the ongoing COVID-19 pandemic. Most of the banks offer monthly payouts on FDs. 

You can go for such kinds of deposits from HDFC Bank, Indian Bank, SBI Bank, Axis, and others. You have the option to opt for monthly, quarterly, and annual returns. 

You have to start your FD in a lump sum to get monthly returns. If you want an alternative source of income on a monthly basis, you can opt for a monthly payout on your FDs. To know your monthly returns it is better to use the online FD calculator. For example, you can check Indian bank fd rates on the Indian Bank’s website.

Comparison Between
Fixed Deposits, Guaranteed Return Plans & Debt Mutual Fund
Guaranteed Return Plans, Fixed Deposits &
Debt Mutual Fund
Guaranteed Return Plans
Returns Before Tax
7.5% (TAX-FREE)
Returns After Tax
7.5%
Guaranteed Returns
Yes
Life Cover
Yes
Tax on Profit
Tax Free*
Risk
No Risk
awards
Still Better than FD’s and Debt Mutual Fund
Fixed Deposits
Returns Before Tax
7% (TAXABLE)
Returns After Tax
4.8%
Guaranteed Returns
Yes
Life Cover
No
Tax on Profit
Taxable
Risk
Low Risk
Debt Mutual Fund
Returns Before Tax
8% (TAXABLE)
Returns After Tax
5.5%
Guaranteed Returns
No
Life Cover
No
Tax on Profit
Taxable
Risk
High Risk
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Easy to Calculate Fixed Deposit Monthly Interest Payout

Most of the banks In India have a provision to open an FD account through mobile banking and internet banking. It enables all the potential investors to ascertain the monthly interest payout that they can earn.

Benefits of Fixed Deposits for Indians

You deposit the amount in a lump sum and the bank will pay the equated monthly installments. The monthly installments include the part principal and the interest. The interest will be calculated on the reducing balance and it will be paid on a monthly basis. 

For example, if you have deposited Rs. 5 lakh and after a few days, the deposit can be withdrawn as per your financial needs. You can withdraw up to the limit specified by your bank and there can be some penalty attached as well. The amount will be credited to your bank account and for the remaining sum; the interest is to be accumulated as per the FD tenure. 

fd return beater

Listed below are the benefits because of which Indian prefer FDs

  • Assured Returns – The returns on fixed deposits are pre-decided. The bank that commits the interest rate to the customer should pay the committed amount without fail. With guaranteed returns, there is no risk to the customer.  

  • Guaranteed Returns- FD rate of returns are higher as compared to the banks’ savings account. The interest rate on fixed deposits varies from 3.5% to 8% per annum based on the bank and the tenure you select. 

  • Online Facility- Amid the ongoing coronavirus pandemic, people are now choosing the online option to open, renew, or close their bank FDs. it can simply be done using mobile or net banking. 

  • Multiple FD Tenure Options- You can choose the most convenient tenure. the tenure and can be less than one-year and as little as 7 days and can go up to 10 years. 

  • Is a relatively liquid form of investment- The best part that Indians love about FDs is that they can withdraw their capital investment as per their requirement. The amount can be availed instantly thereby making it the right investment to meet emergencies. Nonetheless, any premature attracts penalties.

  • FD Returns - Before creating a fixed deposit, you should be aware of the returns on the fixed deposits. The online FD Calculator can be used to calculate returns. 

Key Features of FDs with Monthly Returns-

  •   The payment begins one year post the payment

  •   Individuals, joint account holders, firms, and businesses can open an FD Account

  •   Interest is paid monthly as per the FD tenure

  •   TDS – applicable

  •   Nomination facility – available

  •   Premature closure – available

  •   Nomination facility is also available

  •   The account holder can take a loan/overdraft on fixed deposits

FD interest rates India have fallen consistently over the last 12 years.
Invest in Plans that offer Guaranteed Returns for over 25 Years

Factors Influencing the FD Interest Rate

The bank will revise the interest rates on regular basis based on the following factors: 

  • Economic Scenario- India’s economic conditions along with fiscal and monetary policies have a significant impact on FD interest rates. You can earn higher returns and build the required corpus. 

  • Investment Amount- The opening amount of your FD has a direct impact on the Interest rate that applies to your FD.

  • Your Age - The age of the investor is an important determining factor for your FD returns. The interest earned on Senior citizens FDs is higher as compared to the normal FDs.

  • Easy Renewals- If you opt for an auto-renewal option, you can earn higher interest rates on your FD. You don't need to keep track; you can check the date online on the app or on the FD calculator.

Bottom-line

So, you can open a Fixed Deposit Account in any of the banks in India. You can deposit a lump sum amount and get the payout after the maturity period or on a monthly basis. Most Indians are averse investors and therefore prefer fixed deposits as they are safe and secure method to meet their financial goals. 

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