In a survey conducted by SEBI, it was found that still, 95% of Indians like to invest in fixed deposits as there is no market risk involved in these investment instruments. Only around 5% or a little more of the country’s population are exploring other investment options. There are ample reasons why most people invest in fixed deposits in this country. With the recent increases in the repo rates, the fixed deposit rates are also increasing to an extent which earlier dropped around 5.5% on average. This will furthermore boost the investments in fixed deposits in India.
1- Easy to understand:
The first reason why still Indians prefer to do investment in fixed deposits is that FDs are easy to understand. You invest a certain amount, and after a certain period, you get back the principal as well as the interest accumulated if you do not withdraw the interest and reinvest it. There is a fixed interest rate that FDs offer. Thus, it is simple to understand for every individual whether he or she is financially aware or not.
2- Lack of awareness:
The second reason why most people invest in FDs is the lack of awareness about other investment instruments available in the country. Financial literacy and awareness are still in a nascent stage in this country.
3- Safe and offer guaranteed returns:
Fixed deposits offer guaranteed returns. You deposit Rs. X and after 5 years you get Rs. Y. There is no market risk involved in this and thus no volatility. Moreover, people can invest for longer tenures as well as shorter tenures depending on their investment goals.
4- Not linked to the stock market:
Fixed deposits do not invest the fund into the stock market. Thus, the returns generated by fixed deposits are not linked to the market and thus there is no market risk as well.
5- Convenient to invest:
In India, banking facilities have entered the rural and remote areas however, there are hardly any other investment firms which have penetrated this real India. Thus, investing in bank FDs is more convenient for people across the country.
6- Regular income from interest:
Fixed deposits pay interest to every FD investor. The fixed deposit interest rate is decided by the bank or the financial institute when you are opening the fixed deposit account. The base rate is decided by RBI known as the Repo rate upon which commercial banks offer their interest rates. There are two types of fixed deposits, one where you can withdraw the interest amount every month or year and there is another option that helps you reinvest the interest generated. While the first option gives you a source of regular income, then the second option will help you build wealth.
7- Comparatively Liquid investment:
Bank FDs are comparatively liquid investments compared to other forms of traditional investments. Though there are maturity periods for FDs however, if the FD holder wants to withdraw the fund, they can against paying some charges.
8- Higher interest rates for senior citizens:
Most banks offer higher interest rates on FDs for senior citizens. The interest rates differ by also 0.25% to 0.65% in the case of senior citizens. This is another reason why the elderly population of the country are still a great fan of FDs.
9- Tax benefits:
By investing in FDs, one can get a tax deduction of up to Rs. 150000 under section 80C.
10- Loan facility against FDs:
One can avail of loans by keeping FDs as collateral security as well.
Thus, if you are planning for investing in FDs, use the fixed deposit calculator to find out how much you can save over a period of time without taking any market risk or risking the capital.
Leave A Reply