A fixed deposit, often known as an FD, is a type of investment instrument offered by banks and non-banking financial institutions (NBFCs). You invest for a certain period of time and receive a fixed interest rate with FDs also, you will receive fixed returns regardless of how interest rates fluctuate or how the economy performs at the time of investing.
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Banks offering best rate on 5 year FDs
DCB offers the best rate for 5 year bank fixed deposit, as of now it offers 6.60 and quarterly compounded return of 10,000 will be Rs 13872.27. Indusind Bank is offering 6.50 percent and quarterly compounded return of 10,000 will be Rs 13804.20. RBL Bank is offering interest rate of 6.30 percent and quarterly compounded return will be Rs 13669.00. IDFC First Bank and Karur Vysya Bank offer interest rates of 5.25 percent and 5.89 with quarterly compounded returns of Rs 13635.39 and 13336.47 respectively. (These interest rates are as on June 9, 2022.)
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Create FD ladder
Distribute the amount of your FD over several years. Investing in FDs should be done in a ‘laddering’ way to minimise reinvestment risk and ensure liquidity. Instead of booking one large FD for the long term, you break it into parts when making an FD ladder. In a ladder, the amount is divided into smaller FDs, which are then booked one by one after an interval of 3-5 years, from the first to the last. With such a large gap between the first and last, your prospects of getting the best rate on your FD will be high.
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Covered in DIGCC
Each bank customer is eligible for insurance up to a maximum of Rs 5,00,000 for both principal and interest amounts held in the bank if the bank license is cancelled or during liquidation as under Deposit Insurance and Credit Guarantee Corporation (DIGCC).
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Go for Sweep-in FD
The excess money in the savings account is automatically moved into the fixed deposit whenever the amount in the savings account exceeds that stated limit. Your savings account balance will earn a higher rate of interest than if it were in a regular savings account.According to HDFC Bank, “When you apply for the sweep-in facility, what the bank really does is, it breaks up units of the specified FD in units of Rs. 1. In doing this, it makes sure funds are available in your sweep-in Savings or Current Accounts, whichever is linked. With this, cheques or any other debit transaction from your account is not hindered due to lack of sufficient funds in your Savings/Current Account.”
