Fixed deposits are considered to be one of the safest investment options of all time. Many people opt for investing in a fixed deposit account as it offers investors with higher returns than a savings account.
Usually, people go for investing surplus funds in a fixed deposit, as this is a one-time investment. But after the demonetisation drive, the Reserve Bank of India (RBI) has lowered interest rates by 25 basis points. This news can be relieving to the borrowers but not to the investors.
To bring down the MCLR rates, the banks had to cut down their charge on deposits, which eventually brought down interest rates on their fixed deposit investments. Here are some other investment options that you can opt for in case you are rethinking your investment plan:
- Mutual funds:
Though mutual funds involve high risk, they also offer higher returns. The interest rate offered on a mutual fund investment is high as compared to fixed deposit interest rates. Also, mutual funds don’t restrict you from withdrawing funds whenever you wish, whereas, fixed deposits do. If you land up in a financial emergency, then you can withdraw funds from mutual funds without any restrictions. This gives you a good reason to invest in mutual funds. Experts suggest investing in mutual funds when you cannot earn higher returns on your investment in fixed deposits.
- NBFC fixed deposits:
If you don’t want to put your money in a higher risk investment, then you can invest in fixed deposits that are issued by Non-Banking Financial Companies (NBFCs). NBFCs offer you 2% more interest rate than banks, which can help you earn higher interest rates on your fixed deposit investment, despite the rate cut you can use online FD calculator for calculating your maturity retuns. However, it is important that you do your research before investing in an NBFC fixed deposit as NBFCs are less trustworthy than banks. By investing in an NBFC fixed deposit, you not only earn higher returns but you also get to invest in an instrument which is less risky.
- Senior citizen fixed deposit:
If you are over 60 years of age and want to invest in an FD, or if you want to open a fixed deposit account for your parents, then the rate cut won’t affect you. Though there is a cut on general fixed deposit interest rates, banks are still offering high returns for senior citizens FD. This should be good news to anyone who wishes to invest their surplus funds coming from an old age pension.
Now that you know all your options, you can choose to invest your money in a way that gets you the desired returns. However, it is imperative that you do your homework before choosing any of the options listed above, in order to avoid putting your hard-earned money at serious risk.
Veeramachineni Lalitha
I am Finance Content Writer. I write Personal Finance, banking, investment, and insurance related content for top clients including Kotak Mahindra Bank, Edelweiss, ICICI BANK and IDFC FIRST Bank. My experience details : Linkedin