In the current post-pandemic situation, a depositor in India has to face the blow to their monthly income. Still, they have also earned enough through the interest on investment received due to the increasing inflation rate. It is expected that if you are investing in fixed deposits, then there is the probability that you can earn a lot more in the form of interest.
Most new investors prefer fixed deposits because they are comparatively risk-free and can ensure a fixed return. Apart from the safety of your hard-earned money from market risk, you only have to invest in FD once for a particular period. The fixed deposit interest rates provided by various banks and financial institutions are heavily influenced by the bank policies, tenure, principal amount of Deposit, etc. The fixed deposit interest rate accumulated throughout the tenure is calculated based on the total amount invested on the fixed deposit at the date of maturity.
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Different Types of FD Accounts Available in India
General Fixed Deposit
Traditional fixed deposits are most common among investors. To apply for this type of FD, you don’t need to have a separate bank account, and it has tenure, which can be between 7 days to 10 years. The fixed deposit interest rates you can get from various banks can range between 4% to 7.5%, which is generally much higher than an ordinary savings account.
Tax Saving Fixed Deposit Account
Through investing in these types of fixed deposits, you can avail tax deduction of ₹1.5 lakhs in each on the principal amount you have invested. However, the tax-saving fixed deposit has a 5-year lock-in period that imposes restriction withdrawal for that period.
Flexible Fixed Deposit Account
Indian banks offer you a special kind of advantage in terms of deposits. The flexible Fixed deposit accounts are essentially a combination of both deposit and fixed accounts. Thus you can enjoy the benefits of liquidity along with high fixed deposit interest rates.
Cumulative Fixed Deposit
In these types of fixed deposits, you don’t enjoy the security of fixed Interest Rates. Thus you can grow your investment through the compounding of interest on either a quarterly or yearly basis.
Non-Cumulative Fixed Deposit
This particular type of fixed deposit is best suited for senior citizens or retired people as they can withdraw the interest on a yearly or monthly basis.
Recent Prediction of Sudden Rise in Interest
Recently Reserve Bank Of India has been aiming since 2020 to keep the policy and this plan has been extended till 2021 for now. They are aiming to implement new measures to ensure more liquidity. Through these measures, they are trying to make finance affordable along with economic growth. Thus the low credit could lead to low demand for funds by banks and lenders, which becomes the prime reason for low fixed deposit interest rates. Refinancing a business or Company’s Current Debt.
Though it is expected there is a possibility of earning more monthly income with economic growth of 10.5% in the financial year of 2021-2022. This positive economic growth is also reflected in fixed deposit interest rates. However, the government continues to adapt the policy to ensure liquidity which generally means no rise in interest rate. But there are various other factors because you can expect a rise in the fixed deposit rate.
- The credit demand is likely to rise dramatically in the recent financial year. The growing demand for fixed deposit funds will increase fixed deposit interest rates. This sudden demand is expected to be generated mainly from the infrastructure and real estate sectors.
- RBI is currently facing a tough situation while maintaining its aim of an inflammation rate of 4-6% and ensuring liquidity in the financial system. The policy that ensures liquidity will result in the rise of an inflation rate that also hikes up both credit and deposit rates.
- The CRR rate has now been up to 4% in two tranches. The rise in CRR rates will result in reductions of liquidity in the banking system, which will force the banks to seek more funds from retail depositors to end the credit demand.
Thus this financial year can become a blessing for many FD holders suffering from the blow of the post-pandemic economic crisis. Nowadays, you can easily apply fixed deposits online and multiply your hard-earned savings.