What Factors affect the Rate of Interest in Fixed Deposit in India?

Fixed deposits (FD) are term deposits that earn the investors returns at a higher rate of interest as compared to a savings account. The FD returns can be earned either by getting the interest credited into the investor’s savings account on a regular basis or by opting for the accumulated interest to be a one-time credit into the savings account at the end of the maturity period. It is important to remember that withdrawing the FD amount before maturity shall attract a penalty. Moreover, the FD returns are entirely dependent on the rate of interest, and here are the key factors that affect the FD rate of interest:

  • Investor’s Age

The FD rate of interest applicable to an individual depends on his/her age. Senior citizens above the age of 60 years usually are entitled to higher FD interest rates over the general investors.

  • Investment Corpus

The amount put in by the investor in Fixed deposits has an impact on the FD interest rate. The higher the amount invested in an FD, the higher shall be the rate of interest and thus the returns.

  • Tenor

The tenor offered on FDs varies between a few days to several years. The longer the FD’s tenor, the higher is the FD rate of interest.

  • FD Renewal Terms

Investors who opt for an auto-renewal facility can avail a higher FD interest rate on their cumulative fixed deposits as it saves valuable time that goes into manual renewals. It also benefits the investors by doing away with the need to track renewal dates.

  • Prevailing Economic Situation

The ongoing domestic economic conditions along with the monetary and fiscal policy have a bearing on the fixed deposit interest rate in India. Factors such as demand and supply of currency, inflation, fiscal deficit, and government borrowings, and foreign exchange rates are key to influencing the fixed deposit interest rate in India.

The Bottomline

Given the current fragile economic scenario and volatile markets, more and more people are looking forward to low-risk investment options that fetch them attractive returns by preserving their invested money. FDs are one such stable, low-risk investments that could fulfil your financial goals. While FDs are an ideal option for persons with non-taxable income or with a marginal tax rate income to earn a decent post-tax return, the high-net-worth individuals (HNWIs) too, can consider the FDs as part of their asset classification. With inflation fluctuations, it is important to look for FDs that assure a rate of return over and above the inflation rate.

With approved and robust MAAA and CRISIL FAAA ratings, investing in fixed deposits available on Finserv MARKETS could be your best bet for lucrative returns.

On Finserv MARKETS, you can now invest in FDs even with a minimum amount of Rs. 25000 at interest rates of upto 6.75 percent and opt for flexible tenures ranging between 12 to 60 months. What’s more, is that investors can claim a tax deduction of upto Rs. 1.5 Lakhs under Section 80C of the Indian Income Tax Act, 1961.

Tags : FD interest rateFD rate of interestFixed deposit interest rate in India