A fixed deposit (FD), also known as time deposit (TD) offers a fixed interest rate on the deposited funds for a specific period, unlike market-linked investments where interest fluctuates frequently. Term deposit interest rates differ from financial institution to institution i.e. banks or Non-Banking Financial Companies (NBFCs). You can compare FD interest rates of different financial institutions before investing.
Fixed Deposit Interest Rates Nov 2020
All financial institutions review their FD interest rates from time to time as per policies and benchmark rates issued by Reserve Bank of India (RBI). But the interest rate is fixed at the time of opening an FD account. Therefore, even after a change in FD rates by your FD issuer, your fixed deposit interest rates will remain constant.
Currently, bank FD interest rates are between 2.5% – 5.5% for non-seniors and up to 6.30% for senior citizens. On the other hand, NBFCs are offering higher interest rates up to 6.35%.
Factors Affecting FD Interest Returns
Fixed deposit interest rates depend upon various factors such as:
- Funds invested in FD account
Interest rates on an FD are applicable as per the amount deposited by the depositor. Higher the amount higher the interest rates.
- Investor’s Category
Most banks offer higher interest rates for senior citizens aged 60 years and above. Bajaj Finance offers 0.25% additional interest rate to senior citizens.
- Investment Tenor
FD investment tenor is flexible. One can invest in an FD for 7 days to 10 years depending on the financial institution you choose. You need to set your financial goals and then choose a lock-in period of an FD. Goals such as world tour, marriage, overseas education for kids etc. can be planned.
- Mode of Investment
Some corporate FDs such as Bajaj Finance FD offer an additional interest rate benefit of 0.10% if you invest using the online application procedure.
- Periodic interest pay-outs
A depositor can opt for crediting periodic interest payments like monthly, quarterly, half-yearly or annually as per his requirements. For example, a depositor who is dependent on the interest income to meet his monthly expenses can choose to receive monthly interest payouts.
Here depositors should note that the frequent interest payouts decline the interest rate and maturity amount also as the interest income is not reinvested thereby waiving off the compound interest on an FD. Cumulative fixed deposits provide higher interest earnings and the interest is compounded on a quarterly basis.
An investor can maximize his returns by claiming income tax deduction. FD interest income is fully taxable in the hand of a depositor. But, they have the option to claim TDS redemption. Form 15G/H will help you to save TDS.
- Incentive on FD renewal
FD issuers offer an additional interest rate benefit if their clients renew FDs with them. For example, Bajaj Finance FD offers an additional interest rate benefit of 0.10% upon auto-renewal.
Due to repetitive repo rate cuts by the Reserve Bank of India, FD interest rates of bank FDs have been falling. However, if you choose to invest in corporate FDs such as Bajaj Finance FD, you can earn higher interest rates up to 6.85%. In addition to high interest rates, Bajaj Finance FD also offers other distinguished benefits such as an online application procedure, flexibility to choose tenors and periodic interest payout frequency, loan against FD, multi-deposit facility and much more.
Moreover, Bajaj Finance FD is also rated highly for its safety and stability by reputed credit rating organizations such as CRISIL and ICRA. Bajaj Finance FD is rated FAAA/Stable by CRISIL and MAAA (stable) by ICRA- the highest ratings in the industry. This means that your investment amount is safe and you will receive guaranteed returns upon maturity.