Investment analysis in bank deposits in India

To this day, most Indian households swear by bank deposits and Public Provident Funds (PPFs). Our parents still wax lyrical about these two investments. They are like family heirlooms, passed down generations. The numbers bear this point, too. As per the Reserve Bank of India, over 48 per cent of Indian household’s financial investments lie in bank deposits and PPF as of March 31, 2023and 41% of the household savings as of March 2022.

Performance

True, PPF still retains some merit, especially for conservative investors or those looking for ‘low risk-low return’ options, 

An analysis finds that Indian banks are well placed in terms of quality of deposits and also the possible impact of mark-to-market losses on held-to-maturity book. Bank Fixed Deposit remains the most preferred financial instrument in the country, though their share has declined over the years, with investors moving towards the capital market instruments. The Bank deposits grew at 10% CAGR in the past five years.

The Banking industry in India has historically been one of the most stable systems globally, despite global upheavals. Indian banks demonstrated resilience and stood tall amid the storms witnessed globally.

Banks are the backbone of the economy.

Indian investors can keep their money in banks for a fixed period thanks to Fixed Deposits. The investment period may be between seven days and ten years. Interest rates on Fixed Deposits are typically higher than those on savings accounts.

Standard Fixed Deposit plans, tax-saving plans, plans for senior citizens, etc., are all options. In addition, any Indian citizen, NRI, minor, institution, old, or partnership firm can open fixed Deposit accounts.

Most Indians who question where they keep their extra money will use Fixed Deposit plans. Making an FD investment in this context is equivalent to being financially mature. So if you have one of these accounts, it can help you get through tough financial times.Fixed Deposits are investments that allow people to park a sizable portion of their extra savings and experience significant wealth growth. These instruments are not market-linked. As a result, they do not carry the same risks as mutual funds or stocks.

In this blog, we will first take a closer look at this norm before learning more about how Fixed Deposits have changed over time in India. 

Fixed Deposits in India: A Synopsis

For those looking for guaranteed returns on their deposits, Fixed Deposits are one of the best savings instruments. A Fixed Deposit is a bank account that is opened where the bank guarantees to pay interest on the funds deposited for a predetermined amount of time. Therefore, you can increase the returns on money in your savings account by making a Fixed Deposit.

As a result of people’s desire to maintain a risk-free investment strategy, Indians view Fixed Deposit schemes as one of the safest investment options.

Unlike other investments, FD accounts are secure and trustworthy and produce modest but guaranteed returns. Senior citizens, therefore, favour investing in plans that provide the best FD rates.

Features Making Fixed-Deposits the Most-Preferred in India Are Listed Below

1. Indians know that Fixed Deposits are a secure investment, nearly as fast as their savings account. Such tools also provide several additional advantages, including-
   

2. Guaranteed Returns

3. Fixed Deposit returns are predetermined. The bank guaranteeing the customer’s interest rate must always pay the agreed-upon sum. Therefore, the customer assumes no risks when there are guaranteed returns. Additionally, FD rates of return are higher than bank savings account rates. Fixed Deposit interest rates range from 3.5% to 8% annually, depending on the bank and the tenure you choose.

4. Liquidity

5. The best feature of FDs that Indians adore is the ability to make capital withdrawals as needed. The fact that the money is immediately available makes it the ideal investment for handling emergencies. However, being premature results in penalties.

6. Loans on Fixed Deposits

7. You can use your Fixed Deposit account as collateral for financial institutions to extend you a line of credit. You can also get these loans without meeting additional eligibility requirements. These credits typically have loan-to-value ratios between 85% and 90%. Contrarily, equity investments or mutual funds do not provide such credit facilities.

8. Flexible Tenures

9. Irrespective of what type of investment you select, it is vital to link it to a financial objective and the time frame within which you’d like to achieve that objective. One of the biggest benefits of FDs is its flexible investment tenure. You can select any duration between 7 days and 10 years. This makes FD investment an excellent option for any type of short-term or long-term financial objective.

10. Unaffected by Market Turmoil

11. Market turbulence cannot affect how much money FDs generate in returns. As a result, they represent a low-risk investment choice with respectable returns.

12. Fixed Deposits Can Serve as Income Plans for Retired Individuals

13. After retirement, it is easy to generate a comfortable income if you park your savings in a non-cumulative FD. Those who do not have the luxury of relying on a generous pension will find this a handy option.

14. Helps to create Corpus in Your Portfolio

15. Fixed Deposits can help you maintain a portfolio balance. FDs do not carry risk, whereas market-linked instruments like stocks and mutual funds do. They are risk-free investments that guarantee a return over a predetermined time.

Conclusion

In conclusion, fixed deposits are a reliable way to grow your savings with guaranteed returns and minimal risk. By understanding their various facets, you can make well-informed financial decisions, ensuring a secure financial future.