Fixed Deposits are now on a comeback trail and it has become a rational decision for the investors to invest in fixed deposits. The article explores the various aspects of fixed deposits.
The
term `fixed' in Fixed Deposits (FDs) indicate the tenure of maturity. Therefore
FDs presume a certain time period for which the depositor chooses to keep the
money in the bank, but the rate of interest payable to the depositor is decided
as per this time period. Rate of interest can differ from bank to bank and is
usually higher for foreign and private sector banks. The depositor can also withdraw
his money before the completion of the tenure. However, the amount of interest
goes down in such cases, usually 1% to 2% less than the original rate. As per
RBI regulations "There will be no interest paid for any premature withdrawals
for the period of 15 to 29 days or 15 to 45 days as the case may be." Before
going into the details of FDs, let us look into some other attractive small savings
schemes.
There
are different types of small savings schemes for various segments of the Indian
population. Those who are searching for tax saving instruments and good returns,
small savings schemes can be a suitable option. These investment schemes are the
best way to insure oneself against any future changes in the interest rates. Some
schemes are Kisan Vikas Patra (KVP), National Savings Certificate (NSC), Public
Provident Fund (PPF), Post Office Monthly Income Schemes (POMIS), Post Office
Time Deposits (POTD), Post Office Recurring Deposit Schemes (PORD), Post Office
Saving Account (POSA), Pay Roll Saving Schemes (PRSS), Sanchayika Saving Scheme,
and Senior Citizen Saving Schemes (SCSS).
PPF
is a very popular small savings scheme, which offers 8% return with maturity period
of 15 years. It offers regular savings that can vary from Rs. 500 to Rs. 70,000
per annum. There is nothing better than PPF especially for efficient tax saving
for a longer period. For high tax payers, it has been considered as the fixed-income
investment. But PPF is not a good option for those who are looking for liquidity.
Withdrawals can be made after the expiry of five years from the end of the financial
year in which the first deposit is made, but there is no protection against inflation. |
