It is not wonder to hear that no Indian is unaware of FD’s(Fixed Deposits)these days. By nature, Indians are natural savers as a result they prefer FD’s than any other fixed income saving instrument. Especially risk-averse customers prefer FD’s as they guarantee the principal amount along with interest added.
All Banks offer FD’s ranging from 7 days to 10years(maximum period).Depending on the investor short-term needs and long-term requirements, customers may choose the tenure. But it is preferable to choose shorter period(up to 5years- which are also known as Tax saving FD’s)as they are unable to beat inflation in the long run.
Pros and Cons of FD‘s-
1. They are Flexible as they offer FD amount even with a 1000 rupees
2.They are withdrawn/cancelled at any time where the interest accrued would be payable at the time of the premature cancellation.
3.For those who prefer guaranteed income in the form of the interest amount, FD’s are the only option
4.To avail TDS(Tax deducted at source)from the interest income above 40,000(For General Public)Form 15G and Form 15H(For senior citizens whose interest income falls above 50,000 per financial year)has to be submitted(at the time of making FD & at the beginning of the financial year)
1.They don’t beat inflation and they are suitable only for short-term needs.
2.They don’t offer tax benefits(except for 5 year tax saving Fd)where the interest income is added to the income of the investor and taxed under- “Income for other sources”
3.They attract penalty of 0.5-1% for premature closure of FD subject to the banks terms and conditions
4.Due to the inflation concerns and the government directives banks are reducing interest rates from the past 1-2 years which are unable to beat inflation.
Coming to the point, all commercial Banks offer FD’s and the customers may choose the bank which offer highest interest rate. The interest rates offered by the various banks are as under-
|Name of the bank||1 Year||2 Year||3 Year||5 Year|
|Karur Vysya Bank||5.25||5.50||5.50||5.75|
|State Bank of India||4.90||5.10||5.30||5.40|
|Union Bank of India||5.00||5.20||5.40||5.50|
|Bank of Baroda||4.90||5.10||5.25||5.25|
|Punjab National Bank(PNB)||5.00||5.00||5.10||5.25|
Though some co-operative banks offer higher interest rates, they are riskier than commercial bank fixed deposits as commercial bank deposits are backed by the central government DGIC Scheme(Central government is liable to pay 5 lakh per individual if the bank is bankrupted/defaulted to pay the amount)
Please note Interest rates are subject to change periodically upon bank’s discretion. Customers can ascertain interest rate as on the date of the deposit acclaimed by the bank on time-to-time basis.