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  • What is FD rates in banks & post office ?

    Are you looking the best ways to invest your money? Ask our technical experts for the best guidance.

    I want to invest my money. Which is best way I can get more interest? Which way is more safe and secure? How many ways are there in India to invest money? Which bank gives the highest interest rate? Also suggest me which is better among recurring deposit and fixed deposit for a salaried person?
  • Answers

    3 Answers found.
  • Bank and post office fixed deposits are almost similar in almost all respects. However, there are a couple of unique differences.

    Post office offers you term deposits ( another term used for the fixed deposits) for fixed tenures. The tenures offered are 1, 2,3 and 5 years. On the other hand, banks have flexible tenures. Right from a shorter tenure of 3 months to a maximum of 10 years with different tenures in between. So, one can conclude that flexibility is the best feature in bank deposits.

    However, the minimum amount of investment for a fixed deposit in banks is stipulated as high as Rs. 10000. Post offices accept deposits of a lesser amount, say, Rs. 500. The service is thus best suited for low income groups.

    The postal deposits can be closed prematurely without any penalty. You will be paid interest as you would be getting for a savings bank account. Banks, on the other hand, charge you a penal interest on premature withdrawal.

    The term deposits maintained at the post offices is practically safer as it is backed by the government. Banks operate on the basis of profits and thus may choose to withdraw some of the services.

    You will be eligible for Income Tax Exemption under section 80C if you invest in post office term deposit scheme for 5 years. There isn't any tax deduction at source for post office term deposits, while banks deduct income taxes.

    Post office offers you a higher rate of interest in comparison to the bank deposits. Banks accept fixed deposits from anyone. Even a minor can open an account with a bank, while post offices accept fixed deposits from only from an adult.

    To sum it up, I would wish to state that both bank and post office fixed deposits have their own advantages and disadvantages. I would advice you to choose the scheme that best suits you.

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  • Here are some of the answers for you questions.

    What is FD rates in banks & post office ?

    For 1 year the rate is 7% in private banks and PSU banks. Almost every PSU and private banks have pretty much same rate of interest for Fixed deposit. Some of them slightly different from the others in terms of holding period and in turn giving different rates. For example some private banks hold money for 390 days for 7.50% where as PSU bank gives 7.25% for the same amount. In case of Post office you'd find the rates much lower than the PSU and private banks. For example for 1 year period the rate of interest is 7% and 7.10% for 390 days.

    Which is best way I can get more interest?

    If you are interested in taking more risk then dividing the amount in corporate FD and bank (PSU or private) can be beneficial for you. In this case one amount earns money with 1 to 1.5% more than the bank FDs. Its' risky with corporate FDs so you should only keep the amount which you're comfortably handle to see change as per the market changes. Keeping money in corporate fixed deposit for 390 days yields better interest. Again this is subjective and based on the choices of corporate FD and where you invest.

    Which way is more safe and secure?

    PSU banks and Post office are more secure considering their investment and mode of operation has lesser risk. This also means that the FD of those institution may attract lesser interest too. In such hybrid PSU like SBI can be safe and secure and also competitive interest rate to that of private banks.

    How many ways are there in India to invest money?

    You have an option to invest in the following - Fixed deposit, Kisan vikas patra, PPF, NPS, Mutual fund, stock, Post office MIS, Recurring deposit and SIP equity, Gold etc. These are the most common ways people invest their money in the market. If you want safety and consistent interest rate then FD, PPF, NPS, KVP and post office MIS schemes are better. Other options with equity module in them are slightly shaky in terms of rate of interest and returns.

    Which bank gives the highest interest rate?

    As explained above for 1 year period you have pretty much same rate of interest. You would get differing rate of interest for the 390 days period from private banks or PSU banks. In case of that period you'd find different rate of interest.

    Also suggest me which is better among recurring deposit and fixed deposit for a salaried person?

    Recurring deposit is good for those who can't accumulate bigger sum or lumpsum amount for the FD. For example if you want to save 90 K amount and can't do it in lumpsum then recurring deposit makes sense. In case of recurring amount doing it over 5 year period may fetch less amount of interest, however that amount would have no TDS. In case of FD, you;'d find the same deposit over 5 year period may have no TDS. Most of the salaried people with fluctuating income, you can find the recurring deposit much better option. In case if your income rises, you can make fixed deposit of that additional money.

  • If you have some lump sum amount, Fixed Deposit (FD) is the obvious answer. However, considering your profile of a salaried employee, with no lump sum but a regular flow of salary, it is advisable to go for a Recurring Deposit (RD).

    Let us understand more about RD. In RD one needs to deposit a fixed amount for a certain tenor. The RD gets its power from compounding. Whatever you have in your RD account, you get a quarterly interest on that amount, which gets added to your account and you get interest on that interest as well. This is called Power of Compounding.

    Let us understand more with an example. Suppose you saved Rs. 10,000/- per month for 24 months and then made an FD of Rs. 2,40,000/-. Then for 24 months you get no interest or at most 4% interest, which you get in a saving Bank Account. However, if you opt for an RD of Rs. 10,000/- per month for 24 months at 7.65%, this amount will become 2,58,900/-! So, you can see the difference the RD can make. The difference increases with as the tenor increases.

    Now coming to the interest rate part. I'll advise to for a small bank for FD. Rate offered on deposits (including FD/RD) by a Bank depends on its deposit base. For example, for a two year FD with SBI, you will get 7.25% p.a. interest. While for the same tenor, you will get 8.25% p.a. from newly opened Bandhan Bank and Ratnakar Bank.

    So, this was about the zero risk (almost) ways of investment. But one can opt for higher rate of return with some risk. For that please read about Equity funds (most risky, highest rate of return), Mutual Funds (medium risk, medium rate of return) etc.

    Hope it helps.

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