In India, people are more inclined towards assured returns rather than taking risks. This is why fixed deposits are one of the most favourable investment instruments for potential investors, as it is a reliable way to grow your money. Moreover, our country’s Fixed Deposit Interest Rate is quite lucrative, pulling many individuals towards it.
One must understand that putting aside a few bucks from your monthly earnings is not an investment. Growing your wealth exponentially by investing it at the right time and right manner is very important. Around seven and a half months back, when I entered the professional field, I always had in the back of my mind to invest in fixed deposits.
What is a fixed deposit?
Also known as a term deposit, a fixed deposit is an investment instrument banks/financial institutions offer. In this scheme, an individual deposits a sum of money with a bank for a fixed tenure, ranging from a few months to several years. The investment made here earns a fixed interest rate for the term duration, generally higher than the interest rate on a regular savings account.
When the tenure ends, the original principal amount and interest are returned to the depositor. In India, it is one of the most sought-after investments as it offers assured returns and is low-risk.
(Tip: Use an FD calculator to calculate FD interest before investing your hard-earned money.)
What factors affect the FD interest rates?
The tenure of your investment is directly linked to the FD interest rate. Therefore, one can typically avail the best deal by choosing an extended duration. For example, 10-year FD returns are always higher than a one-year FD.
The investor’s age plays a crucial role in determining the interest rate applicable on an FD. Usually, Senior Citizens earn higher interest rates as compared to the average investors.
If inflation is high, financial institutions tend to raise interest rates to keep pace with the rising cost of living. Because if they don’t, the deposited money’s value will decrease over time, as the interest rate earned on the deposit would be less than the inflation rate.
The Reserve Bank of India (RBI) is responsible for setting monetary policy, which includes determining the rate of interest. Therefore, it can increase or decrease the repo rate, which in turn can impact the Interest Rate.
Banks may offer preferential Fixed Deposit Interest Rate to potential customers with higher credit ratings. So, basically, customers with good credit are considered less risky and more likely to pay back their deposits on time.
How to invest in FD?
Long gone are the days when people used to go to financial institutions physically. Nowadays, there are certain applications available. For example, when I was planning to invest, one of my colleagues told me about the Bajaj Finserv app. Believe me, it is super easy to use.
- Download the app from App Store/Play Store.
- Sign up by entering your mobile number
- Go to the Fixed Deposit option under the Investment Bazaar on the home page
- Choose accordingly, and you are good to go.
Before investing your hard-earned money, it is important to calculate fd interest, but considering the abovementioned factors is also essential. Moreover, if you have fixed short/long-term goals, a fixed deposit is one of your best investments.