If others are getting higher returns from fixed deposits than you, it is time to beat them. We are living in an era of low interest rates. Interest rates have already fallen 250 basis points or 2.5 per cent in the last 18 months, as the RBI has cut rates sharply.
Bank deposits, which were fetching as much as 9.3 per cent, 36 months ago, are giving you just about 7 per cent today. It's time to increase returns from FDs and here are 7 smart ways of doing so.
Chase company fixed deposits
There is nothing wrong with solid AAA rated company deposits like Mahindra Finance, Bajaj Finserv, DHFL and KTDFC. They give you 1 per cent to 1.5 per cent more than bank deposits. And, if your investment is large, the broker might also share his commission with you.
However, you should avoid low rated company deposits as risk of default is high. Companies like KTDFC and Tamil Nadu Power Finance are deposits that are guaranteed by the state governments and hence they are safe.
Study the yields and not interest rates
Banks compound interest rates every quarter. This improves the yield. If others compound the yield every year, you will lose money. So, in the end what counts is yields, that should be viewed along with interest rates.
So, if a bank offers you an interest rate of 8 per cent with quarterly compounding and others offers you an interest rate of 8 per cent annual compounding, the bank deposit would offer better yield. So, it is extremely important for you to check compounding,
Avoid TDS only where possible
If your income is not taxable, you better submit form 15g or form 15h. While, form 15g is for individuals other than senior citizens, form 15h is for senior citizens. This way you would avoid tax deducted at source. Otherwise, you have to file tax returns to get the refund back.
Do not submit these forms, if your income crosses the tax paying limit.
Check for interest rates across duration
Longer term tenures may tend to give you slightly higher interest rates, though not always the case. Also, if you believe that interest rates are falling, you should lock money for the long term. This way you would not have to worry about a further drop in interest rates. However, it is not possible to predict interest rates all of the time and if you lock money, it is also possible that you might lose in case interest rates climb.
Allows you to apply anywhere, anytime
There is no special interest rates for those applying in deposits online. But, there is an advantage, in the sense that you can apply to any bank for a bank deposit. For example, at the moment, there are many small finance banks that offer you a very good interest rate. Some of these offer you interest rates as high as 8.5 per cent per annum. This means, that you are not stuck with just one bank, which is your bank.
Move beyond geographies.
Apply for cumulative deposits
Cumulative deposits tender to give you better in terms of yield, since the interest rates are compounded quarterly.
This makes them a good proposition.However, do so, only if you do not need regular income.
Many comparisons portal available
There are many portals in the country that offer you a comparison online. For company fixed deposits, you can visit the portal of Bajaj Capital, which allows you a comparison of fixed deposits interest online.
For bank deposits too there are many portals that offer a quick comparison across tenures and amounts. Compare bank interest rates here