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Why Is Now The Best Time To Invest In Fixed Deposit?

Sunil Fernandes

Making smart investments can help you gain valuable returns, which ensure the growth of wealth. For investors seeking stable growth of funds, without any effect of market fluctuations, fixed deposit is one of the most preferred investment avenues. When you invest in fixed deposit, interest on your principal accrues over time to yield valuable returns, due to the power of compounding.

For instance, if you invest Rs. 1,00,000 for 5 years at an interest rate of 8.75%, you earn an interest income of Rs. 52,106 which is ~16% more than what simple interest calculations would have given you. As you would have observed, a key parameter that determines your ROI is the FD interest rate obtained.

In the present-day economic situation, financial experts believe that opening a fixed deposit now can be a very smart decision. Here are three reasons why you should invest in a fixed deposit soon.

Impact Of Repo Rate Cut On Interest Rates

On February 7, 2019, RBI cut its lending rates by 25 basis points, bringing repo rates to 6.25% from 6.50%. While this has made borrowing from RBI easier, there may be an increase in liquidity. The net amount earned by financiers is the remainder of the amount borrowed via loans, minus the amount deposited in fixed deposits. Since the public can now borrow at lower rates, financiers will look to cut deposit rates as well.

In the past few quarters, FD interest rates were on an upswing with issuers like Bajaj Finance hiking rates by 0.10% in October 2018. However, with FD interest rates now on the helm of a possible cut, capitalising on high-interest rates offered by these financiers now, will enable you to earn more, through the tenor.

Increased Market Volatility Fuelled By Economic Uncertainty

The investment landscape witnessed a fair deal of storms in 2018 and if you are a conservative investor you may be looking at 2019 with a pinch of scepticism. The IL&FS defaults and their resulting ICRA downgrade by several notches exposed the risks involved in debt investments. On the equity side, global factors like China-US trade war and internal constituents like the forthcoming general elections could result in clouds of uncertainty looming over investments affected by market fluctuations.

On the other hand, fixed deposits generate stable returns via fixed interest rates and help in safeguarding your investments, by ensuring guaranteed returns. For investors seeking stability in their investment portfolio, fixed deposit is an ideal investment option, during these times of increasing volatilities.

Current FD Interest Rates Vis-À-Vis Other Saving Schemes

If you are someone who parks your finances primarily in saving schemes, then the recent 0.10% EPF hike would have given plenty of reason for cheer. However, things get better when you take into consideration the current FD interest rates offered by financiers. For instance, Bajaj Finance offers interest rates of up to 9.10% for senior citizens, up to 9.0% for existing customers and up to 8.75% for first-time FD account holders.

Here's a look at the current interest rates offered by different savings schemes, which may help you earn higher returns:

Investment Options Return offered
Bajaj Finance Fixed Deposit 8.75% - 9.10%
Senior Citizen Savings Scheme (SCSS) 8.70%
Employee Provident Fund 8.65%
LIC Housing FD 8.30% - 8.55%
National Saving Certificate 8.00%
Public Provident Fund 8.00%

While there are several safe investment options, such as PPF, SCSS, NSC and more, Bajaj Finance Fixed Deposit offers one of the highest interest rates. You can choose flexible tenors between 12 and 60 months, and start investing with just Rs. 25,000. Bajaj Finance FD has the highest safety ratings of FAAA by CRISIL and MAAA by ICRA, which ensure that your investment amount, is never at risk.

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