FindItMore | Fixed deposits are by far the most viable investment alternatives for Indian investors. For one, FDs offer a considerably higher rate of interest than savings accounts. Also, the investor is sure to get his returns, since the returns remain unaffected by movements in the market. Moreover, they can also act as useful instruments for tax planning, with 5 year tax-saving fixed deposits. These deposits provide deductions under Section 80C of the Income Tax Act.
There can be two alternatives that one can choose from while contemplating an investment in an FD scheme.
- Bank Fixed Deposits.
- Company Fixed Deposits.
Both these alternatives come with specific pros and cons attached to them. There are some ways in which company fixed deposits score over bank fixed deposits.
- Higher returns
Deposits made in Non-Banking Financial Companies offer considerably higher FD interest rates when compared to bank fixed deposits. Companies bearing a likeness to NBFCs, for instance, have interest rates, beginning from 8.10%. For senior citizen investors, the very same rates start from 8.45%.
- Benefit of diversification
The company fixed FDs also provide the investor with the benefit of diversification. Fixed deposits, in general, are the safest avenue for investment. Risk-averse investors, in particular, have a distinct inclination towards fixed deposits. On the other hand, investors who have a varied mix of investments in their portfolio can use these as required buffers.
FD interest rates are steady, irrespective of market ups and downs. Therefore, company fixed deposits, which provide a higher interest rate, are better instruments for diversification than bank fixed deposits. One has the assurance of steady and reasonably high returns from them. Thus, they become preferred choices for portfolio diversification for investors who have their funds invested in varied investments. Such varied investments might also consist of instruments that have market-dependent returns.
Also, for investors who seek to park their funds solely in company fixed deposits can avail the benefit of diversification as well. They can divide their funds between cumulative and non-cumulative fixed deposits. Whereas the former gives out a lump sum after a specified period of maturity, the latter, gives regular returns, on a monthly or quarterly basis.
To choose the optimum investment mix, investors can always opt for FD calculators. These calculators can be used to arrive at final amounts that are receivable from the investment. Hence, they aid investors in planning their investible amounts and tenures accordingly.
- The flexibility of tenure and ease of premature withdrawal
Company FDs come with yet another benefit, other than high FD interest rates. One can easily choose the tenure for which one wishes to keep his funds parked in them. These tenures can range anywhere between 12-60 months depending on investors’ requirement.
Further, there are also special rates that are offered for specific investment periods. For example, NBFCs offers special FD interest rates higher by 0.10% on fixed deposits invested for a period of 15 months.
Similarly, one can use FD calculators to arrive at the required prospective amount, by calculating returns on various amounts of principal, for varied tenures.
Moreover, fixed deposits are meant to ensure liquidity along with savings. On this front, again, company FDs score better than bank FDs. While withdrawing a company fixed deposit prematurely (in cases of financial exigencies), investors have to forego a lower interest amount when compared to bank fixed deposits.
- Simplicity of booking and withdrawal
Company FDs have the benefit of online booking and processing of the deposit application. While the whole procedure becomes paperless, there’s much less hassle for management of funds, on the investors’ part.
Further, renewals and even premature withdrawals can be done online. The investor is saved of a lot of trouble thereby, as all requisites processed are seamlessly managed without much hassle.
Financing institutions on the lines of NBFCs, provide investors with company fixed deposits laced with all the facilities mentioned above. Not just that, their widespread presence of 200+ branches across India, make them accessible to their prospects like never before.
Of course, they have a distinct edge over other companies, as well. With ratings of MAAA and FAAA from ICRA and CRISIL respectively, they provide the investor with greater reliability and assurance of investment safety as well.