When it comes to investment, fixed deposits (FDs) have always been a preferred option for risk-averse investors looking for assured returns. That being said, with the changing financial scenario, small finance banks have become an excellent avenue for those who want to earn a higher interest on their savings. Now, you can earn more than 9% on fixed deposits, and thus small finance banks are a good bet in a low-interest-rate environment. This blog explains how you can make the most of the high returns and why small finance bank FDs are gaining popularity among investors, especially when compared to other options like Tata Capital’s Mega IPO and share market investments.
Why Invest in Small Finance Banks for FDs?
Small finance banks are famous for offering higher rates of interest compared to the larger ones. Small finance banks focus on extending financial services to underbanked segments of society, such as small trade units, low-income individuals, and rural areas. To mobilize deposits to a greater extent, they offer reasonable rates of interest on fixed deposits. Some small finance banks have also raised their FD rates to over 9% recently, and these are ideal options for those looking to earn more on savings with minimal risk.
Investing in share market or risky assets is a daunting thought to most conservative investors. The buzz surrounding Tata Capital’s Mega IPO has made others consider entering the share market, but to a few, the fixed deposit stands as the most secure and safe investment option. With small finance banks offering appealing rates, the FD is the easy and secure way to invest your savings with no fear of the share market.
What Are the Advantages of Small Finance Bank FDs?
Higher Interest Rate: As discussed, one of the key advantages of investing in small finance bank FDs is the significantly higher interest rate. With over 9% interest rates, you can earn more than what commercial banks offer under normal circumstances where interest rates are lower.
Safety and Security: FDs are among the safest investments. Small finance banks are regulated by the Reserve Bank of India (RBI) and are backed by the Deposit Insurance and Credit Guarantee Corporation (DICGC) scheme, which covers deposits up to ₹5 lakh per depositor. This ensures your investment even if the bank faces a financial crisis.
Fixed Returns: Unlike stocks or mutual funds, FDs offer fixed returns. This predictability can be a major advantage for risk-averse investors. You’ll know exactly how much your investment will yield at the end of the term, without worrying about market fluctuations.
Flexibility of Tenure: Small finance banks offer FDs with varying tenures from a few months to years. You can have the flexibility to choose the appropriate tenure based on your financial goals and liquidity needs.
No Risk of the Market: Fixed deposits are not subject to market fluctuations, which is a strong point in its favor in uncertain times. While investments in the share market, say Tata Capital’s Mega IPO, carry inherent risks and fluctuations, FDs provide a haven for investors looking for safe, guaranteed returns.
Small Finance Banks vs. Share Market Investments
While banks that offer small finances are a safe means for investors to earn high returns, some investors are tempted to seek opportunities in the share market. The recent buzz over Tata Capital’s Mega IPO has generated interest in equity markets, where some investors expect high returns. But the share market carries a higher risk. Share prices fluctuate and returns can swing wildly. For example, while some IPOs see their value skyrocket, others do not fare as well and result in losses.
Investors looking for the security of fixed deposits can stay away from the share market volatility by choosing to invest in small finance bank FDs. In addition, interest on FD is paid at a frequency that is periodic, such as monthly or quarterly, or at maturity, providing a constant income stream for people who like to have specific cash flows.
Do You Need Share Market Astrology?
Many investors use astrology for predicting share market movements. Share market astrology has found some backing among proponents of the theory that the activity of celestial bodies can influence how well a share market performs. However, making investment decisions on the basis of astrology is a risky business, as it pays no attention to the real factors that influence the stock market. Unlike the speculative interest of share market astrology, small finance bank FDs are backed by sound financial institutions and guarantee fixed returns, thus being more dependable for everyone.
Methods to Obtain Your Maximum Return Through Small Finance Bank FDs
If you wish to earn returns in excess of 9% on your fixed deposits, certain steps which you might take are:
Choose the Right Bank: Not all small finance banks pay the same rate of interest. Compare the FD rates of different banks and do some research before you invest in them. Some banks offer special rates for senior citizens, so if you belong to this group, take advantage of the higher rates.
Invest for Longer Tenures: Generally, the longer the tenure, the higher the rate of interest. If you can keep your money tied up for a longer period, you may possibly get a better return. But ensure that the tenure is appropriate for your investment horizon and liquidity needs.
Select Cumulative FDs: Cumulative FDs provide you with interest compounded over the period, earning you more than a non-cumulative FD. If you don’t need to use your money immediately, this could be a great way to boost your return.
Ladder Your FDs: FD laddering is the method of splitting your investments in multiple FDs with varying tenures. This way, you can benefit from rising interest rates while you still have liquidity.
Conclusion
Small finance bank FDs offer a wonderful method of earning more than 9% returns with minimal risk. They are secure and stable and an excellent option for risk-averse investors. Though others may be tempted to try the share market or the hype over Tata Capital’s Mega IPO, small finance bank FDs are still a surefire and secure option to increase your savings. Whether you’re new to investing or looking for a safe haven in a volatile market, consider small finance banks as a viable option to secure your financial future.
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