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Flexi-deposit schemes of banks: What are the features and benefits?
Such schemes that combine the features of savings and fixed deposit account allow an investor to realize higher returns applicable on fixed deposit accounts if balance amount in the account exceeds specified value.
So, together with higher returns, such an investment option offers a chance to invest a lump sum amount in an hassle free manner and gain liquidity benefits.
The fixed deposit account shall bear the maturity term as specified by the account holder at the time of opening the account.
At present, several public-run as well as private sector banking entities are offering such flexi schemes, including UBI, SBI, ICICI Bank and BOI among others that require an individual to open an account with a minimum sum.
For instance flexi deposit scheme of UBI requires an individual to open a Savings Bank Flexi account with the bank with the minimum capital of Rs. 20,000/-
Other advantages of maintaining a flexi-deposit account
Other than higher returns and liquidity benefits, flexi-deposit account holder can also avoid the hassles and penalty charges in case if he draws a cheque on the savings bank account that has a balance of a lesser value than what he has issued for.
As the amount over and above that maintained in the savings bank account is taken from the fixed deposit account and balance amount in the flexi-FD account shall continue to earn returns as applicable.
Should you invest in flexi-deposit schemes?
Individuals resident in India as well as NRIs who are eligible to open savings bank account as per the current rules and regulations can open the account.
But whether should you or not park your sum in this scheme is a question? If you are looking for a simple investment basket that can take care of your return needs in a reasonable manner and enable you garner higher returns in contrast to otherwise meager returns that accrue by parking funds in a savings account, you can bet on such an option.
Also, due to the high safety, it can prove be a good bet for conservative investor class who do not wish to go out of the way for earning high returns.
But, it is to be remembered that with every investment decision, there can be an associated opportunity cost of missing out on a better product that can yield higher returns.
So, if you have ample time to go about hunting the right investment product that judiciously meets your investment objective, risk appetite, return, liquidity and other concerns, you might definitely find a better product among other available avenues of investment in the market.
The reason why other products can prove better over flexi-deposit schemes is that only after a minimum set limit for the account is exceeded, amount shall be transferred to the FD flexi account.
And, interest rate applicable on the date of transfer of funds to the flexi-FD account shall be earned which currently on an average stands in the range of 8-9%.
And, as such returns fail to beat inflation rate in the economy, there could be options that can yield higher returns but can also involve higher risk.
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