The investment patterns and needs differ from investor to investor. It is quite intimidating to choose a perfect investment tool with the numerous financial choices we have at present. While conservative investors look for assured return assets, like fixed deposits and recurring deposits, risk-taking investors opt for assets like stocks, mutual funds, and even cryptocurrencies to multiply their investments in a shorter span of time. A major chunk of Indians still prefers to park their money in a fixed deposit or term deposit scheme, mainly because it is risk-proof and promises assured returns better than savings account interest.
The banks, both public and private, have increased their fixed deposit rates following the Reserve Bank of India’s recent repo rate in early August. The current repo rates stand at 5.4 per cent after it was raised by 50 bps. Most banks offer decent interest rates in different time horizons. Depositors can opt for fixed deposit schemes from 7 days to 10 years, depending on their financial goals.
Just like banks, the India Post Services offers fixed deposit schemes under different tenures ranging from 1 year to 5 years, and offer a guaranteed fixed return to investors. The minimum amount for the FD scheme is Rs 1,000, which is the same for both general and senior citizen investors. The investors should note that the interest is paid annually, and transferred to the investors’ savings account. Just like bank FDs, premature withdrawal of a Post Office Term Deposit is possible but only between 6 months and 1 year from the date the scheme was issued.
For a one-year deposit, Post Office offers an interest rate of 5.5 per cent. For the one-to-three-year scheme, the interest rate is 5.5 per cent. For a 5-year time term deposit, the interest rate is 6.7 per cent. The rates are the same for general and senior citizen investors.
Bank FDs vs Post Office FDs
The biggest draw about Post Office FDs is as these are government schemes, they are linked with government securities, and therefore, are the least volatile to market fluctuations.
Bank FD rates depend on central bank rate revision and can fluctuate from time to time depending upon the performance of the market. Therefore, different banks offer different interest rates. The interest rates for Post Office FD schemes are revised every quarter; for example how for the second quarter of FY 2022-23, the Finance ministry has decided to keep the rates unchanged for now.
A look at some possible investment scenarios
|Investment||For 1, 2, 3 years (interest rate: 5.5%)||For 5 years (interest rate: 6.7%)|
|Rs 50,000||Rs 58,947||Rs 69,832|
|Rs 1 lakh||Rs 117,895||Rs 139,664|
|Rs 2 lakh||Rs 235,790||Rs 279,328|
|Rs 5 lakh||Rs 589,474||Rs 698,319|
|Rs 10 lakh||Rs 1,178,949||Rs 1,396,638|
The bank FDs have flexible tenures ranging between 7 days and 10 years, whereas post office schemes can be stretched only up to five years.
Copyright©2022 Living Media India Limited. For reprint rights: Syndications Today