Fixed deposits despite the low interest rate regime are still the most coveted route for some senior investor and other conservative investor class owing to their risk-aversion attitude. While these are mostly known to fetch a cumulative return on maturity, there are ways they can also be put so as to yield regular income stream.
Here are 2 such options:
1. Laddering technique:
In it investors invest in several fixed deposits or even other securities for that matter of different amounts across different tenures and even across banks. This way while you may be able to manage liquidity, you will also be able to avoid interest rate and reinvestment risk.
Say for instance, if you have Rs. 3 lakh surplus then instead of making 1-year FD of Rs. 3 lakh, you may divide it into 3 equal parts and invest each portion separately. Say one can be invested for 1 year term, 2nd for 2 years and 3rd may be for three years. And with different maturities, as and when the FD matures, while taking care of your liquidity needs, you may invest the remaining amount in another FD, thereby creating a chain of FDs or different investment options maturing at different time-frames.
This way investors can rest assured of assured returns from the avenue and also in times of higher interest rate regime, may have some investment that may be maturing which can they be deployed to higher yielding avenue.
Further, as per the investors convenience laddering can be a quarterly, bi-yearly or yearly exercise.
2. Systematic Deposit Plan by NBFCs:
Bajaj Finance has come up with a unique offering similar to mutual funds where SIP is done and same way in FDs one can deposit every month. So, it is a RD kind of instrument on offer by a corporate. Here, the minimum deposit amount is Rs. 5000 and investment can be made for 12 to 60 months.
And here for each month you invest, you get fresh FD at the then prevailing rates.
Currently the rate stands at 7.35%. And here for the pay-out option you can choose either the monthly, , quarterly, half-yearly, annually or cumulative options, as per your requirement. Senior Citizens will still get a higher return.
These corporate FDs carry a high CRISIL and ICRA rating of 'FAAA' which indicates high degree of safety. And investors through such a plan will surely be able to get better interest rates as against bank deposits.
And now coming to the main point of discussion here that is of availing regular returns, such systematic deposit plans come with a flexibility that allows partial withdrawal in case the need be. Now considering the current situation, wherein lower interest rates may prevail longer, the offer isn't lucrative and even withdrawal prematurely is allowed once the deposit completes at least 3 months time.
The scheme is however suitable for those who wish to accumulate through small amount for short to medium term. Also it may be best for those in the lower tax bracket.