One of the conventional investment opportunities in India is fixed deposits (FDs). FDs provide an interest rate that is competitive and far better than what a traditional savings bank account does. Especially, since there are no market linked risks, investments made in fixed deposits are deemed to be strongly secured. Under the laws of the Deposit Insurance and Credit Guarantee Corporation (DICGC), each bank depositor is covered up to a limit of Rs 5,00,000 (Rupees Five Lakhs) for both the principal and interest balance maintained by the bank. Considering the 1-year fixed deposits currently there are few banks and companies that are offering good returns to the general public such as IndusInd Bank and ESAF Small Finance Bank with interest rate of 7%, Shriram City Union Finance with interest rate of 7.5% and Kerala Transport Development Finance Corporation Limited (KTDFC) with the highest interest rate of 8% respectively. On the other side elderly people can get an additional interest rate of 0.5% on their deposits for 1-year.
Post Office Time Deposit
This post office scheme deemed one of the most stable opportunities for investment as it is backed by the government. Term deposits (POTDs) fall with maturity periods of 1,2,3 and 5 years and the interest rates are paid out annually. Every quarter, the government sets the interest rates. At the prevailing rate, the entire investment made will give you returns of 5.5 % for 1-year tenure. Similarly, for the tenure of 2 and 3 years the interest rate is the same whereas it is 6.7% if you deposit in this scheme for a tenure of 5 years. One can make deposits in this scheme by making a minimum investment of Rs 1000/- and in multiple of 100 with no upper cap. Before the expiry of 6 months of the account, no early or premature withdrawal is allowed. If the TD account is discontinued after 6 months but within 1 year, the interest rate of the PO Savings Account will apply.
1-Year Recurring Deposits
If you want to regularly deposit a small fixed amount with a bank, recurring deposits (RDs) are appropriate. At the expiration of the tenure of the recurring deposit, you will obtain a lump sum of interest. If compared to regular savings bank accounts, RDs also give even better returns, like FDs. This investment tool can be useful if you are looking to save on a short-term basis regularly, i.e. for 12 months. For a period as low as 6 months and then in multiples of 3 months, up to 10 years, one can even open a RD account. If you want to get higher returns for a tenure of 1 year on RD, then Yes Bank can give you a decent return of 6.50% and 7% to senior citizens. A RD account usually has a minimum lock-in duration of one month. No interest shall be accrued to the depositor in the event of a premature closure within a month and only the principal amount shall be returned. Once the deposit is withdrawn prematurely, interest will be determined only at the rate applicable for the duration of the deposit.
You must remember that the post-tax return is low until considering your investments as the interest or the profits are credited to your hand and taxed as per your income slab. It is suggested that you must opt for secure investment vehicles where there is no chance of losing capital, if you are planning to invest for a period of 1-year. Hence, in short if investment period is less you must always choose safety over interest rates first.