Considering an investment in the near future? There are many options to invest your wealth out there, and a fixed deposit is a surefire way to guarantee fixed returns on your investment. For instance, if you wish to invest even a small amount, say, Rs. 1 lakh, you can do so with ease and check out many banks and financial institutions for competitive interest rates. A 1 lakh fixed deposit is a good way to start your investment in fixed deposits, and you may have other ways to allocate the rest of your wealth. However, you should know a bit about aspects of fixed deposits before you invest in this safe and secure investment product.
Why Invest in a Fixed Deposit?
With inflation rates only rising in India, you need to have savings, either to tide you over for future days to come, for emergencies, or to meet the demands of daily living expenses. A fixed deposit offers you guaranteed savings in terms of fixed interest that you can receive on a monthly basis. One solution to meet the needs of fund allocation and saving is to go in for a fixed deposit. For those who wish to play it safe, and not delve into risky markets like the stock market or other volatile areas of investment, fixed deposits are a good way to invest.
In case you have funds that are lying idle in a savings account with a bank, you will soon discover that interest rates are not very high and you hardly earn any returns. Therefore, you can keep as little as Rs. 1 lakh in a fixed deposit and earn more. What’s more, bank FD rates may be low, but you can explore company and financial institution fixed deposit interest rates which may be higher.
FD Rates Compared
FD rates vary from bank to bank and from financial institution to financial institution. When you open a fixed deposit, you will undoubtedly wish to get the highest rate possible for the tenure you choose. Sriram Finance & Bajaj FD rates among NBFCs, and SBI & HDFC FD rates among banks are comparatively higher in the market. You can make use of an FD calculator that is available online at many bank and financial institute websites and this is easy to use. All you need to do is to enter your fixed deposit amount and your tenure. However, some general rates of interest are mentioned in the table below, so you may get an idea of how rates apply:
|Type of FD||Tenure||Fixed Deposit Interest|
|FDs from Banks||1 – 5 years||2.5% – 5.5%|
|FDs from NBFCs||1 – 5 years||4% – 9%|
|FDs from Corporates||1 – 5 years||7% – 9%|
Interest on a Rs. 1 Lakh FD
When you choose to invest in an FD, the interest rate that is finally offered to you from a bank, an NBFC or a corporation will largely depend on the FD amount and the tenure you opt for. Additionally, interest rates are also influenced by the frequency of the payout that you select (i.e. monthly, quarterly, etc.). Nonetheless, you can expect bank FD rates to be in the range of 2.5%-3.5% for longer tenures and a little bit higher for longer tenures that may go up to 5 years. On the other hand, FDs from NBFCs are higher, even if you choose a short tenure of just a year, and will start at 5% and above.