Fixed Deposit (FD) is an investment product offered by financial institutions. It continues to remain relevant despite fluctuations in market-linked investments.
Unlike market-based products, fixed deposits offer fixed returns as per applicable terms and tenure. This article explains the key parameters to consider while selecting a fixed deposit scheme and what to look for before investing.
Interest Rate
The foremost parameter to consider while comparing different FD schemes online is the interest rate offered by the financial institution. The interest rate determines the return you receive on the principal amount at maturity.
1. Why is the Interest Rate Important? In an economy where inflation is rising, choosing an appropriate interest rate helps maintain the value of your savings over time.
2. What Should Depositors Do? Compare interest rates across financial institutions and review tenure options carefully. Avoid institutions offering very low interest rates and evaluate their credit ratings before investing. You may also consider institutions that provide additional benefits for women depositors and senior citizens.
Flexible Tenure
The next important parameter is the tenure of the fixed deposit, which defines your lock-in period. Most financial institutions offer flexible tenure options ranging from 12 to 60 months.
Cumulative FD vs. Non-Cumulative FD
These are basically two variants of FD, differentiated by interest payout frequency. Cumulative FD pays interest at the end of the maturity period, while non-cumulative FD pays interest at regular intervals, i.e. monthly, quarterly, half-yearly, or yearly.
What Should You Choose?
Depending on your need for money, you can choose any of these types. Cumulative FD schemes are ideal for depositors who do not feel the need for liquid cash for the entire tenure of their FD.
What If You’re Retired?
As a retired person or someone nearing retirement, you may want to go for non-cumulative FDs to enjoy steady pay-outs at your chosen frequency.
Hassle-Free Application Process
Choose a financial institution that offers a convenient and paperless application process. An online application facility allows you to open and manage your fixed deposit without visiting a physical branch. A fully digital process can simplify monitoring and management of your investment.
Minimum Documentation
Apart from the online application and monitoring process, you will also have to make sure that the financial institution asks for only the essential documentation.
1. Necessary Documents: Basic identity proof, address proof, and photographs are generally required.
2. Business Documents: If it is a corporate approaching for an FD, then additional registration/incorporation documents are required.
Financial Institution’s Credibility:
Before investing, review the credibility of the financial institution. Do your research to find a credible FD provider and one of the best ways to do that is to check their credit ratings.
There are many credit rating agencies in India like - CRISIL, ICRA, CARE, etc., who give these financial companies a rating. Investors are advised to review such information carefully before investing.
Conclusion
Selecting a fixed deposit scheme requires evaluating interest rates, tenure options, withdrawal terms, documentation requirements, and institutional credibility. Shriram Finance offers cumulative and non-cumulative fixed deposit options with interest rates up to 8.15%* p.a. (including an additional interest rate of 0.50%* p.a. for senior citizens and 0.05%* p.a. for women depositors).
For more details, you may visit our website and use the fixed deposit calculator to estimate returns based on your investment amount and tenure.