How to Look for a Suitable Fixed Deposits Scheme in 2020

The monetary policy committee of the Reserve Bank of India has slashed the repo rate 5 times during the Financial Year 2019–20, resulting in a total drop of 125 basis points (1.25%). As a consequence of such reductions, interest rates on savings deposit schemes are likely to drop in the upcoming months. However, savings schemes, including fixed deposits, grew at 6.7% in the current fiscal year.

Fixed deposits hold a market share of approximately 57% as per recent reports published by the Reserve Bank of India. A primary reason for such dominance is that several financial institutions have withheld lowering their interest rates on fixed deposits and other savings schemes in tune with the reduction in repo rates.

Financial experts view such actions as a direct result of the growing demand for saving schemes. In order to bring parity in monetary demand and supply, financiers are determined to encourage savings, especially in the form of fixed deposits, owing to its low associated risk and assured nature.

Regardless of the current measures adopted by leading financial institutions, economic experts conclude that the interest rates on such savings schemes will eventually go down in the coming months.

How to look for the best fixed deposit scheme in 2020?

In order to decide for the best fixed deposit scheme in 2020, you should consider the following features –

  1. Stability and credibility

You should also consider the stability of the financial institution where you will invest via an FD. Check if the FD scheme possesses stability ratings by credible organisations such as CRISIL’s FAA and ICRA’s MAAA to ensure your investment is secure and will generate proper returns.

  1. Multi deposit options

Certain financial institutions such as Bajaj Finance offer the facility of multiple deposits. You can consider investing in several deposits to ensure liquidity in case you face any emergency monetary obligations. Additionally, opening multiple accounts in a single institution would allow you to earn varying returns across different tenors. You can check how tenor on fixed deposit affects interest rates by using an online FD calculator.

  1. Interest rates

Keeping in mind further decline in interest rates of different financial institutions, you should consider the highest rates available on fixed deposits while investing. However, you should bear in mind the stability and credibility of such institution before investing. You can earn higher returns with a Bajaj Finance Fixed Deposit, which is offering up to 8.10% interest on cumulative FDs.

  1. Minimum deposit amount

While fixed deposits continue to be the leading and safest investment options in India, financial planners suggest diversifying the portfolio to some extent and make room for other investment options as well. Therefore, you should look for the minimum amount you can invest in fixed deposits of various financial institutions. There are several financial institutions that allow investing in an FD for as low as Rs. 25,000, allowing an investor enough financial freedom to put money in other schemes.

You can use tools like online FD calculator to determine the returns against any invested amount. It will help you meet your investment goals with ease.

Suitable fixed deposit schemes to look for in 2020

The global economy has been struggling in recent years to maintain its stability owing to the US-China trade war and Brexit. Consequently, Indian economy has also taken toll of the turbulent global economic situation. The growth rate of India has seen major downfall from what was previously speculated.

Therefore, it has become imperative to allow more investments, which has prompted the Reserve Bank of India to reduce repo rates. With speculators believing in the gradual decline of interest rates of savings schemes and also other market-linked investment options in the near future, individuals should consider parking their surplus income in long-term fixed deposits to wait out the turbulent economic situation.

However, financial planners have been categorically warning investors to not depend on small financial institutions for their fixed deposits. Even though these institutions are recently offering high fixed deposit interest rates, it remains dubious how these institutions are maintaining their assets and liabilities and how well such structure would last for a longer period.

According to such planners, a safe bet for investment in savings schemes would be in fixed deposits of leading financial institutions such as Bajaj Finance.

Parking a portion of your corpus in a fixed deposit would allow you to avoid the market fluctuations while continuing to earn assured and uniform returns on your capital. Additionally, you can capitalise on an FD not being linked to the market; therefore, not running the risk of loss due to market volatility.

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