Fixed Deposit

Looking to invest in various deposit accounts? Consider which one will work best for you

If you want full value for your bucks then money must be deposited in the bank to get adequate returns. Banks such as IDFC bank have various types of deposit accounts and deposit schemes where you can safely park your money and get periodic returns on the same. Right from savings deposit schemes to fixed deposits and recurring deposits, there is a gamut of deposit accounts which you can opt for. Let us take a look at what’s the significance of each of these:

Fixed deposits: Under a fixed deposit or an FD scheme, your money is parked with the bank for a fixed tenure, say between 7 days to 10 years. You get a fixed interest rate on your fixed deposit, and the interest rate is higher than a regular savings account. The interest rate may vary between 6 to 10 per cent. The interest gets regularly credited into your account, and you can withdraw it yearly, quarterly or even monthly, depending on your FD scheme. The only minus in case of fixed deposits in all banks is that you cannot withdraw the principal amount whenever you want to, and in case you want to break the FD, pre-closure may come with some penalty. Overall, FD is a great scheme for those looking at investing lump sum funds against a fixed return.

Savings deposit schemes: Those looking for more liquidity and the independence to withdraw and deposit their money whenever they wish to may opt for a savings account. Most banks offer about a 3.5 per cent interest on savings account. IDFC bank offers 4 per cent interest on savings deposit schemes. Though the interest is lower compared to FD schemes, savings bank account provides a lot of flexibility in terms of deposit and withdrawal of cash. There is no fixed amount, too, that you need to deposit in the bank every month in case of savings deposit schemes. The amount may vary, and it is totally up to you how you operate your account. Since there is no concept of a maturity period in case of savings deposit schemes, there are no charges upon withdrawal of money from savings account either.

Recurring deposit: Recurring deposit or RD is a type of term deposit where you need to deposit a specific amount in the bank every month. It’s handy for those who do not have lumpsum cash to invest but can deposit a fixed sum every month. Banks such as IDFC allow recurring deposits for as low as Rs 100 per month. The maturity tenure ranges from 6 months to 120 months (10 years). Interestingly, you can give a standing instruction to the bank to withdraw a fixed sum of money from your saving account on a particular date every month, and credit it to the RD account. Banks such as IDFC gives RD interest rates up to 7.25 per cent with interest compounded quarterly. Senior citizens can avail RD rates up to 7.75 per cent. RD scheme is best for those who are confident that they can part with and deposit a particular sum of money every month into the bank. It is better than a savings deposit scheme in the sense that the interest rate is much higher.

Talking of recurring deposits, some may feel that mutual funds are a better option compared to RDs with both having a similar format for periodic payment. But the catch with mutual funds is that they are market linked and the return on them may fall or rise. Of course, a higher return is always welcome but what if markets are down? Your return will also fall. So it’s safe to assume that there is a higher amount of risk associated with mutual funds. But in case of recurring deposits with banks such as IDFC, your interest remains the same throughout the tenure, and the amount you will get at maturity is fixed, secure and guaranteed.