A fixed deposit is the first investment choice that comes to mind when consumers discuss building capital. You can even calculate how much money you will get if you invest in an FD with the help of a fixed deposit interest calculator. FDs have historically been the most popular investment option due to their numerous advantages and comparatively high degree of flexibility. However, there is a reason why the younger generation has traditionally refrained from making significant investments in FDs. FDs have traditionally struggled to deliver respectable returns.
Additionally, more appealing investment possibilities are available on the market that might aid in generating wealth more quickly. However, the interest rates on FDs are rapidly shifting. So, it can be the proper moment to make large investments in FDs.
FDs are financial products that let investors park their money while earning a fixed interest rate on it. Financial institutions offer a variety of FD products for investment, including-
- Senior citizen FDs
- Flexi FDs
- Cumulative FDs
- Non-cumulative FDs
- Tax-saving FDs
The interest rates on these FDs vary based on the deposit’s term and the financial institution’s policy. The majority of institutions also offer senior people greater interest rates. You can calculate the interest you will earn on your FD using a fixed deposit interest calculator.
Why are FD interest rates rising?
The range of average interest rates was between 2.75% and 6% for FDs. FDs for seniors would offer marginally higher interest rates. However, the fixed deposit has been impacted by the most recent revisions that the RBI made.
Concern has been expressed about the rising inflation not just for the Indian economy but for economies all across the world. Many nations have raised their interest rates in response to combat growing inflation and stabilise the economy.
The central bank raised the repo rates twice in May and June 2022 in accordance with the state of the world economies. The interest rate has increased by a total of 90 basis points over the course of the two months.
The fixed deposit rates have also increased as a result of the increase in interest rates. Some reputed NBFCs provide the highest FD rates in India. You may get around 8.10% interest rates with Bajaj Finserv FD schemes.
Advantages and disadvantages of FD interest rates rising:
Before investing in one, you must understand the advantages and disadvantages of FD interest rates. Many investors consider fixed deposits to be a profitable alternative in light of the recent increase in fixed deposits. Long-term FDs profit the most from the rate increase, whereas short-term FDs only see a very little and barely perceptible increase. Most short-term FDs will not yield enough returns to outperform the nation’s current inflation rate, even with the interest rate increase.
Inflation in the nation is anticipated to rise even more in the near future. The top financial institution raised interest rates in an effort to combat this increasing inflation. Numerous experts say that FD interest rates could even reach 7% to 9% in the upcoming months. However, a firm date for the same is not yet established.
Investors are confused in the midst of this uncertainty. Investors can’t decide whether to wait for the FD interest rate to climb and let their corpus lie idle in the meantime. Or invest now and miss out on the benefits of a raised interest rate in the future months. Therefore, choosing short-term FDs with maturities of up to two years is advised for investors.
As a result, they will be able to benefit from the present interest rate increase. They can withdraw their money at the end of the current term to reinvest in FDs in the event that interest rates continue to rise. Additionally, investors can divide their capital to create an FD ladder.
This effectively means that additional tranches of capital are invested at each interest rate increase. This will aid in taking advantage of future interest rate increases and obtaining average returns. It will also permit liquidity to a certain extent.
The increase in interest rates on FDs is good news for investors as it follows a protracted period in which those rates were negligibly low. FDs are a relatively safer investment alternative than equities funds or stock investments. The returns are modest in comparison to dynamic investment alternatives. They are nevertheless an excellent addition to a portfolio of investments since they help spread the risk and generate almost risk-free profits.