Fixed deposit is a widely used investment option in India and are available through banks and non-banking financial institutions. They provide fixed returns for a defined tenure, subject to applicable terms and conditions. However, allocating surplus funds into fixed deposits should be part of a broader financial plan that considers risk profile, liquidity needs, and investment objectives.

Below are some structured approaches that may be considered while planning fixed deposit investments.

Always look for the right financial institution for reliable FDs

When selecting a fixed deposit, it is advisable to review the financial institution’s background, regulatory status, credit profile, and publicly disclosed financial performance. Interest rates, tenure options, and product features may vary across institutions.

Investors may compare available options based on interest rates, tenure flexibility, and institutional disclosures. A small difference in interest rates should be evaluated alongside credit considerations and product terms before making a decision.

Choosing Between Cumulative and Non-Cumulative Options

Fixed deposits are generally available in cumulative and non-cumulative variants.

Under the cumulative option, interest is compounded at the selected frequency and paid along with the principal amount at maturity, subject to applicable terms and conditions.

Under the non-cumulative option, interest may be paid periodically (such as monthly, quarterly, half-yearly, or annually), depending on the selected payout structure.

The choice between the two options depends on whether the investor prefers periodic income or accumulation until maturity.

Go with the ladder investment strategy

Suppose you have decided to go with a cumulative scheme where you are getting the interest on maturity. But what will you do at times of financial emergency? Go with the ladder investment strategy. Using this strategy, one can easily split the investment amount into multiple fixed deposits by setting different maturity times for each amount.

Example

If an investor allocates ₹2,50,000 to fixed deposits, the amount may be divided into multiple deposits with staggered maturities (for example, 1 year, 2 years, 3 years, and so on), subject to available tenure options.

As each deposit matures, the investor may choose to reinvest at prevailing rates or withdraw funds depending on financial requirements. This strategy may help manage reinvestment risk and provide periodic liquidity, subject to applicable terms and conditions.

Check the Credit Ratings of Fixed Deposits

When considering corporate fixed deposits, investors may review credit ratings assigned by recognised credit rating agencies. These ratings reflect the agency’s assessment of the issuer’s credit profile based on its evaluation methodology.

Credit ratings can help investors understand relative credit risk. However, ratings are not promise of repayment and may be revised over time. Investment decisions should be based on a review of rating rationale, financial disclosures, and individual risk tolerance.

Considering Tenure Selection

Interest rates on fixed deposits may vary depending on tenure, deposit amount, and prevailing rate structure, subject to change and applicable terms and conditions.

If you do not anticipate liquidity requirements in the near future, opt for a longer tenure fixed deposit. It is one of the simplest ways of growing your FD money.

FDs for senior citizen

If you are investing for yourself or your parents as a senior citizen, you may consider fixed deposits for senior citizens, as certain financial institutions may offer additional interest to eligible individuals, subject to applicable product terms and conditions.

Senior citizens may choose between periodic payout options or cumulative variants depending on their income requirements. Loan facilities against fixed deposits may be available, subject to eligibility criteria and applicable terms and conditions.

Always keep the nomination option

If you want to keep your FD money to be transferred to your legal heir or custodian, don’t forget to select the nomination option. If you are the sole depositor, the nominee must be mentioned. In case of any unforeseen situation, the nominee can claim the money, subject to terms and conditions, and your FD money will go in the right hands.

Use the online FD calculators

Online fixed deposit calculators may assist investors in estimating the maturity value based on the deposit amount, tenure, and applicable interest rate. Based on the rate of interest offered on the FD deposit scheme, using the calculator, you can easily calculate the return on the principal amount invested.

Bottom line

Above, we have discussed some effective investment ideas to make your FD money grow. Do your research properly and check the credit ratings to ensure that you are choosing the right institution.

If you are looking for a reliable investment scheme, invest in Shriram Unnati Fixed Deposit. It is accredited with “Crisil AA+/Watch Positive” by Crisil Ratings Limited, “[ICRA]AA+ (Stable)" by ICRA and "IND AA+/Stable" by India Ratings and Research. It is always wise to invest the surplus savings in a fixed deposit plan rather than leaving idle in saving accounts.