This has been the toughest interest rate regime for senior citizens and those who have been living on fixed income. In fact, many investors have not seen such low interest rates on Fds in their lifetime. Every big government owned bank is giving interest rate from 2 to 55.5 per cent. This 5.5 per cent is also for exceedingly long tenures of 5 years and beyond.
Here are 4 bank deposits that offer you higher interest rates
|BANK||1-2 years||2-3 years||3-5 years|
|IDFC First Bank||5.50%||5.75%||6.00%|
What about safety of deposits?
History suggests in India that a full fledged commercial bank has not collapsed till date. Cooperative banks definitely have, but, not the commercial banks. Even the small finance banks have not had problems so far.
Yes, there has been a history of banks like Yes Bank and Global trust Bank running into problems, but, eventually these banks either get bailed out or are bought over by the bigger and stronger banks.
Apart from this, deposits of upto Rs 5 lakhs at all banks put together are insured DICGC. Therefore, to that extent they are secure. However, we all know that to get the money back, while there maybe insurance is always a tough thing.
Is it a risk really?
We really do not see a problem with bigger banks like IndusInd Bank. The bank reported a good set of quarterly numbers, but, there is no saying how things pan out for the banking sector. The second wave of covid-19 infections may put some pressure on the larger retail banks, but, one has to wait and see.
What we recommend investors is to stay invested in deposits for a more shorter duration. Looking at a tenure of 5 years and so on is not advisable at all. This is because, if interest rates rise, breaking your deposits would prove a costly affair. Hence, stick to a shorter duration to get the best.
Also, one cannot predict the direction of interest rates, though we believe in the next 1-2 years, it should go higher.
Look for various other options
Don't stick to bank deposits alone. Look for other investment options like NCDs, tax free bonds etc. These too can offer investors very good yields. However, in case of both of these, since they are listed your yields would depend on your buying price.
There are also debt mutual funds, where you good get decent returns. However, again this depends on the net asset value at which you buy them. Overall, getting returns from the debt class has become very difficult, whether you are a short term investor or long term investor.
Goodreturns.in has taken utmost care in compilation of data for this article. The views and investment tips expressed by authors or employees of Greynium Information Technologies, should not be construed as investment advise to buy the bank deposits mentioned above. You should consult other sources before taking an investment decision, based on the prices provided. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and authors do not accept culpability for losses and/or damages arising based on information in GoodReturns.in