With Fixed Deposit finding themselves under the spotlight in the recent times, it is important to understand the nuances of this instrument to ensure that you’re able to make smart investment decisions. Even as cuts in repo rates and reverse repo rates have brought FD interest rates to as low as 4-6%, Fixed Deposit remains a preferred investment avenue for those seeking assured returns in today’s volatile market conditions.
But amid falling FD rates, how can you ensure highest growth of your capital? Here are some ways to maximise your returns.
Choose the right financier
You can invest in a Fixed Deposit offered by banks, NBFCs, or post offices. However, the interest rates offered by these financiers vary considerably and the choice of the right financier can help you reap maximum returns. Even a difference of a few basis points in interest rates can translate to a huge sum of money.
While banks were traditionally considered as safer alternatives, the recent turmoil in the banking industry has led to investors choosing NBFC Fixed Deposits, because of the higher interest rates. But when selecting a financier, it is not enough to simply look for the highest returns. It is best to select a financier offering a balance of safety and high returns. Thus, when selecting the right financier, you must consider choosing deposits accredited with high safety ratings and stable background.
A case in point is that of Bajaj Finance that offers one of the highest FD interest rates of up to 7.35% and has the highest safety ratings of FAAA by CRISIL and MAAA by ICRA. These high ratings indicate lower likelihood of defaults or delays in repayments.
Look for additional rate benefits
Several financiers offer additional rate benefits to senior citizens, and on different modes of investing. It is important to identity ways to reap these benefits, so you can grow your savings easily.
For example, senior citizens can get 0.25% higher returns on investing in a Bajaj Finance FD, and those under 60 years of age can get 0.10% higher interest rate on investing online. To understand how a difference of a few basis points can make a difference to your returns, let’s assume an amount of Rs. 20,00,000 is invested in a Bajaj Finance Fixed Deposit for 5 years. Check the table below to find how returns would be different for different customers.
| Customer Type | Investment amount (Rs.) | Tenure (years) | Interest Rate | Interest amount (Rs.) | Maturity amount (Rs.) |
| Senior citizens
(offline/online) |
20,00,000 | 5 | 7.35% | 8,51,282 | 28,51,282 |
| Non senior citizen (online) | 20,00,000 | 5 | 7.20% | 8,31,418 | 28,31,418 |
| Non senior citizen (offline) | 20,00,000 | 5 | 7.10% | 8,18,236 | 28,18,236 |
In the above example itself, investing in a Bajaj Finance online FD can enable the same customer to earn Rs. 13,182 more than what they’d earn on investing offline. With a higher rate benefit on investing online, it is best to choose the convenience of an online paperless process that enables you to invest from the comfort of your home.
Choose to receive interest at maturity
When investing in a Fixed Deposit, you always have the option to avail periodic payouts that enable you to fund regular expenses. But, if you’re not looking to fund regular expenses and want to grow your savings more, it is best to choose to receive interest at maturity.
By choosing to receive your interest at maturity, the interest accrued on your investment is re-invested, thereby enabling you to gain the benefit of compounding returns. Thus, this additional yield gets added to your principal amount.
Invest for the longer haul
When it comes to growing your savings, it is better to stay invested for a longer tenure. This enables you to gain higher returns. The longer the tenure, the higher is the yield and the interest rate applicable is also higher.
To understand this better, let’s assume an amount of Rs. 20,00,000 has been invested in a Bajaj Finance online FD for different tenures. Here’s a table to help you compare the returns on your deposit.
| Customer Type | Investment amount (Rs.) | Tenure (years) | Interest Rate | Interest amount (Rs.) | Maturity amount (Rs.) |
| Non senior citizen (online) | 20,00,000 | 1 | 7% | 1,40,000 | 21,40,000 |
| Non senior citizen (online) | 20,00,000 | 2 | 7.10% | 2,94,082 | 22,94,082 |
| Non senior citizen (online) | 20,00,000 | 3 | 7.20% | 4,63,850 | 24,63,850 |
| Non senior citizen (online) | 20,00,000 | 5 | 7.20% | 8,31,418 | 28,31,418 |
The above table shows how the interest on deposits changes grows, with increase in tenure. Even though the interest rate on tenure of 3 years and 5 years is same, the effect of compounding enables higher growth of capital on investing for 5 years. Thus, it is best to choose a longer tenure to grow your savings.
Ladder your deposits and re-invest
For investors looking to maximise their returns on fixed deposits, laddering is a great technique to get the maximum returns on their deposits. Laddering is a strategy that involves making an investment in FDs with different tenures. Thus, instead of locking in your investment in a single FD, you can spread your principal amount across varying tenures. On maturity of your first deposit, you can choose to reinvest your proceeds and benefit from additional interest rates. Issuers like Bajaj Finance offer additional 0.10% returns on renewing your deposits, which enables you to grow your savings furthermore.
In addition to helping you gain higher returns on your deposits, this strategy also helps with your liquidity needs, over a longer time horizon. Plan your investments and incorporate this laddering approach by using the Bajaj Finance FD interest calculator, which can help you determine the returns on your deposit before you invest.
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