A fixed deposit is an instrument that offers a better FD interest rate than a regular savings account once you lock-in a fixed amount for a specific period. It is a smart investment option for investors who want to receive higher returns post maturity in a risk-averse way as compared to mutual funds, equities, and other market-linked instruments.
You can earn substantial returns by investing a large amount for a longer tenor at a competitive interest rate. To earn better returns from a fixed deposit, you can utilize some of the below-mentioned ideas:
High returns from corporate FDs
Recently, the interest rates have been reduced by all the major banks owing to the slowing down of the economy and turbulent economic conditions. The bank FD rates range from 2.5 to 5.5% whereas the postal FD rates are slightly better than bank FDs.
However, the dearth of flexible tenor and liquidity options of post office FD schemes might take away from you the opportunity of investing in a high paying FD whenever the interest rates increase again. Therefore, this is the best time to explore FD avenues other than bank deposits and post office FD schemes.
Some corporate FDs offer a higher interest rate. For instance, Bajaj Finance FD provides an interest rate of up to 6.85% that is one of the highest FD interest rates 2020. Let’s say you have collected a corpus of Rs. 15,00,000 and want to invest it in an FD for three years.
The below table shows a comparison in terms of interest rates and returns between all the FD avenues:
| FD avenue | Principal amount | Tenor | Interest rate | Interest earnings | Returns |
| POTD (Post Office Time Deposit) | Rs. 15,00,000 | 36 months | 5.5% | Rs. 2,67,102 | Rs. 17,67,102 |
| Bank FD | Rs. 15,00,000 | 36 months | 5% | Rs. 2,41,132 | Rs. 17,41,132 |
| Bajaj Finance FD | Rs. 15,00,000 | 36 months | 6.85% | Rs. 3,29,847 | Rs. 18,29,847 |
Ladder deposits
The returns provided by long-term FD plans are higher but your short-term financial needs might suffer by investing in them. To even out the odds, you can invest in both and long term deposit plans by dividing your corpus in FD plans of varying tenors.
This also helps to balance the difference in interest rates and enables you to consolidate your returns at a higher FD rate whenever you get a chance. The multi-deposit facility from Bajaj Finance can be used to invest in multiple FDs simultaneously. You can choose a different tenor and deposit amount for each FD and you can also invest in both FD types as per your convenience.
A flexible tenor range of 12 to 60 months helps you to achieve your short-term and long-term investment goals with ease.
Choose wisely among the FD types
There are two FD types viz. cumulative and non-cumulative FDs and you need to choose one among them as per your financial requirements.
Financiers usually offer the same interest rate for non-cumulative FDs and cumulative FDs. However, the method of interest calculation varies as the interest gets added in the next calculation cycle in case of cumulative FDs which ultimately results in higher returns.
The interest gets paid at regular intervals if you deposit in non-cumulative FDs. A higher interest payout frequency results in lesser compounding of returns and therefore, cumulative FDs offer slightly better returns than non-cumulative FDs.
However, non-cumulative FDs are preferred by those who need some additional funds or a stable income source to meet their regular expenses. The cumulative FD of Bajaj Finance provides the option of monthly, yearly, six-monthly, and quarterly interest payouts that enables you to fund your periodic expenses.
Also, you can deposit your money in a cumulative FD to multiply your returns quickly. The FD rate calculator available on its portal shows the returns of both cumulative and non-cumulative FDs at once and this helps you to make a better decision based on your financial requirements.
Also, major credit rating organizations like CRISIL and ICRA have given it high ratings for securing the deposits of the customers. Therefore, it is a safe investment option as well. Moreover, senior citizens will get a 0.25% extra FD rate, and non-seniors will get a 0.10% additional rate for using an online FD form.