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4 essential factors you should check apart from FD interest rates

While opting for tried and tested investment options like a fixed deposit, it is tempting to only look for the best and highest interest rate before you make your investment.


While opting for tried and tested investment options like a fixed deposit, it is tempting to only look for the best and highest interest rate before you make your investment. While you can use an FD calculator and select the best FD interest rates by comparing the returns, the FD interest rate shouldn’t be the only thing you check when making an investment.

Here are 4 other factors that you must check apart from the FD interest rate.

Credit rating of the FD

Credit ratings are indicative of the safety of your funds and you can evaluate how likely an issue is to pay you the maturity amount on time by examining this. For example, Fixed Deposits account from Bajaj Finance are your best bet because they carry CRISIL’s and ICRA’s highest ratings, FAAA and MAAA respectively. Moreover, with a Bajaj Finance FD, you can earn interest up to 8.75% on an FD that offers returns at maturity (held for at least 36 months) and up to 9.10% if you are a senior citizen.

Type of fixed deposit

There are the two types of FDs that an issuer offers: one where you can get the returns on maturity, as a lump sum and the other where you can get interest payouts at regular intervals. You can select the FD type keeping your financial objectives in mind. When you wish to receive payouts on a monthly, quarterly, half-yearly or annual basis, you can choose to invest in the second type. However, if you want to build a huge corpus for retirement or other long-term goals invest in an FD that offers a lump sum benefit on maturity.

This is important to note because when you opt for an FD with regular payouts, your net gains are slightly lower, as the corpus doesn’t benefit from compounding. In a similar vein, when your goal is to earn FD returns that beat inflation, investing in an FD for a shorter tenor is ideal. You can feed in your details into an FD calculator to view the difference yourself.

Economic conditions in the country

The prevailing economic situation along with the monetary and fiscal policies significantly impact Fixed Deposit interest rates. Apart from this, RBI policies like statutory liquidity ratio, cash reserve ratio, and repo rate also have a bearing on FD interest rates. The bottom line is that these changes affect your net gains. If there is inflation, for example, there will be a subsequent increase in FD interest rates to attract more depositors like you.

Taxation on an FD investment

As you know, interest income is not completely tax-free. It will be added to your total income and taxed as per your tax slab. However, issuers will deduct TDS if your interest income is more than the specified limit. As per the Interim Budget of 2019, the TDS limit for bank and post office FDs will increase to Rs. 40,000 from Rs. 10,000.

Now that you know all the important things to consider before investing in an FD, compare schemes offered by various issues to identify the best deal. Bajaj Finance proves to be a true winner in this regard as it not only offers you one of the best interest rates in the country, you only need Rs. 25,000 to invest and you can even avail a loan against your FD if you need to. Best of all, you can start an FD online by filling a short form and enjoy high FD interest rates today. 

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SEBI found that more than 95% of Indian households preferred investing in fixed deposits (FDs) back in 2017. Few reasons behind the popularity of FDs are their high rate of interest, variable tenors, and availability from the majority of financial institutions.

There are two types of fixed deposit: cumulative and non-cumulative, offering different interest pay-out frequencies.

Cumulative Fixed Deposits

Cumulative FDs provide returns after maturity. Meaning, you receive your investment along with interest after the completion of its tenor, which can range from 12 to 60 months.

You can invest in a cumulative fixed deposit if you have long-term plans and a higher rate of interest.

When to opt for a Cumulative FD?

Cumulative FDs are exceptional when you seek to expand your savings. These can also be helpful if you have a big-ticket expense lined up. For example, invest your savings for 5 years if you are planning a wedding at that time.

Non-Cumulative Fixed Deposits

Another type of FD is a non-cumulative fixed deposit which provides interest returns on a monthly, quarterly, half-yearly, and annual basis. The principal amount remains invested throughout the tenor, and you only receive the interest depending on the chosen frequency.

The interest rate on non-cumulative FDs depends on the interest payout frequency. Annual pay-outs will provide a higher rate of interest than monthly ones.

When to opt for a Non-Cumulative FD?

Non-cumulative fixed deposits are superb if you want regular income. These FDs can help you to manage your recurring short-term expenses and monthly obligations.

Benefits of Cumulative and Non-Cumulative FDs

Lucrative Rates of Interest

Bajaj Finance offers Fixed Deposits with the rate of interests that can go up to 8.75%. Senior citizens also receive an additional 0.35% interest. You can also opt for a special 15-month fixed deposit that offers 0.25% more interest.

Guaranteed and Assured Returns

Returns on fixed deposits are guaranteed and assured as these are not market–linked, unlike mutual funds.

Comes with Stable Ratings

Both these types of fixed deposit hold FAAA rating from CRISIL and MAAA rating from ICRA guaranteeing their safety and stability.

Income Tax Benefits

Investing in tax-saver fixed deposits with a lock-in period of 5 years can help you avail tax benefits. You can claim tax benefits of up to Rs. 1.5 Lakh in a year under Section 80C of the Income Tax Act.

Offers Flexibility

Some financial institutions even offer the option to withdraw funds from your fixed deposits anytime against a minimal penalty charge.

Loans Against Fixed Deposits

You can avail Loans Against Fixed Deposit from Bajaj Finserv. While their cumulative FDs offer up to 75% of the sum available as loan amount, non-cumulative FDs provide up to 60%. You also don’t have to go through a lengthy documentation process or pay charges when foreclosing or part pre-paying the loan.

Make sure to calculate your returns before you invest in any of these types of fixed deposit. An FD interest calculator can help you out precisely to do so.

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