Which Bank Is Safe For Fixed Deposit In India
Fixed Deposits are a great way to invest your hard-earned income, and also receive tax breaks. However, many NRIs are often worried about the risk of fixed deposit. There are many questions swimming around the mind, like is fixed deposit safe, and which bank is safe for fixed deposits in India? How much can you invest in a fixed deposit? You should know that there are certain risks associated with your fixed deposits. In order to successfully mitigate those risks and keep your earnings safe, you should be fully informed about all the advantages and disadvantages of opening a fixed deposit in India. Our experts have gathered all the information you would need regarding fixed deposits. In this handy guide, you will find all the information you would need, like which bank is safe for fixed deposit in India and the risk of fixed deposits in India. We hope this will help you make wise financial decisions while keeping your earnings safe and earning all the tax breaks possible.
What Are Fixed Deposits?
A fixed deposit is nothing but a kind of investment instrument that is offered by banks as well as non-banking financial companies (NBFCs). When you open a fixed deposit, you first deposit a fixed amount for a fixed tenure. The interest earned on this amount will be paid to you. The interest rate on fixed deposits is much higher than that of a savings deposit. Thus, in the long run, a fixed deposit is a great way to increase your savings or plan for a large expense in the future. However, premature withdrawal of your funds could invite a penalty, so make sure you are fully aware of all the terms and conditions before investing.
What Are The Risks Associated With Fixed Deposits?
Fixed deposits are generally considered a safe investment. However, there are certain risks associated with it. You should be aware of all the risks before investing. The risks include:
- Risk of interest rate – There is a chance that your money may be locked up for a fixed tenure for a low rate of interest, depending on the market fluctuations. To combat this, our experts recommend that you invest smaller amounts for different durations in different banks. Thus, if the rate goes up, you can always choose to re-invest the income in another FD once it has matured.
- Risk of Inflation – FDs do not cover inflation. This means that you cannot get an estimate of the real rate of return, which is your investment after subtracting the inflation rate.
- Premature withdrawal – if you are in a situation where you need to withdraw the money deposited in FD, then this would invite a penalty. Some banks offer the option of partial withdrawal, while others do not.
How Much Can You Invest In A Fixed Deposit In India?
The minimum deposit varies from bank to bank. In a Post Office FD scheme, the minimum investment is INR 200, while for some banks like SBI, it is INR 1,000. In HDFC Bank, the minimum amount is INR 5,000. There is currently no upper limit on the amount you can invest in FDs, in India. However, only an amount of INR 100,000 is insured by the RBI. Any amount you invest above this amount could be subject to losses if your bank shuts down or becomes insolvent.
Which Bank is The Safest in India For Fixed Deposits?
All deposits of FD in all banks (be it public sector, private sector or co-operative banks) in India are insured up to INR 100,000 by the Deposit Insurance and Credit Guarantee Corporation (DICGC). This means that in event of bank closure, you will be insured for the principal amount and interest accrued for the above amount, but not beyond that.
In general, public sector banks are considered safer than private banks. Co-operative banks in India also offer FDs. However, this might be a riskier investment as there have been cases of fraud on the part of co-operative banks in India, like the Amarnath Co-operation Bank, which was shut down by RBI due to fraud. You can also open a Corporate FD with a private company. However, there is an inherent risk associated with this as you will lose your savings if the company goes bankrupt. Ensure that you check the ratings of corporate FDs before investing.
Now that you have a clear idea about what exactly is a fixed deposit, you are already on your way to making better financial decisions. In addition, you should, by now, have a clear idea about the risk of fixed deposit in India. Further, many of the common queries we receive from NRIs like is fixed deposit safe? How much can you invest in fixed deposit in India? Which bank is the safest bank in India? should also be crystal clear for you. Armed with all this information, you are in a much safer place than many other NRIs and ordinary citizens of India. Make sure that you are always careful about where you invest your hard-earned wealth. With the right investments, you will receive several tax breaks and advantages in India, as an NRI. Do feel free to drop us a line in the comments section in case you have any further queries regarding fixed deposits in India.