With the expansion of the financial sector, investment options have multiplied manifold for Indian investors. A range of financial products ranging from savings schemes to tax-saving instruments is available. But fixed deposits have remained one of the most popular investment options in India.
Fixed deposits are a type of term deposits offered by banks and non-banking financial companies where a lump-sum amount can be invested for a fixed tenure and interest rate. Fixed deposits are a relatively safe investment option and offer a higher interest rate than a savings account. Generally, there is a lock-in period on a fixed deposit and the money cannot be withdrawn before the tenure ends without paying a penalty. Fixed deposits are ideal for people who have an extremely low appetite for risk but want better returns than a savings account. Deposit tenures range from 7 days to 10 years. Interest earned on fixed deposits is either paid at regular intervals or can be left for reinvesting, which gives the benefit of compounding.
The returns from fixed deposits depend on the type of deposit and the tenure of the scheme. The interest rate also plays an important role in generating returns. The interest rate on fixed deposit schemes is fixed for the entire duration of the investment. Different financial institutions offer different interest rates on fixed deposits. Investors should choose fixed deposits wisely keeping in mind the total returns. Schemes offering below 7 percent should be avoided. You can get attractive rates of interest on fixed deposit schemes on Finserv MARKETS, ranging between 8 percent and 8.95 percent through Finserv MARKETS.
Fixed deposit accounts are of two types—cumulative and non-cumulative.
Cumulative Fixed Deposits: The interest income is paid at the end of the tenure with the principal amount in the case of cumulative fixed deposits. It uses the power of compounding to reinvest the interest earned until the fixed deposit matures. Investors do not receive any interim interest payments in cumulative schemes. These fixed deposits are suitable for people who have a lump-sum amount to invest and do not need a regular income.
Non-Cumulative Fixed Deposits: Contrary to cumulative fixed deposits, the interest on non-cumulative fixed deposits is paid periodically. Financial institutions provide an option to pay the interest in monthly, quarterly, half-yearly or annual instalments. These fixed deposits are ideal for people who need periodic payouts to meet interim expenses.
Different types of fixed deposit accounts will have varying maturity amounts. Even if the principal amount and tenure are the same, the type of account and the interest will lead to different maturity amounts. Moreover, the interest paid on cumulative and non-cumulative accounts differ. The best way to accurately calculate the maturity amount is to use a Fixed Deposit calculator. You can use the easy-to-use calculator available on Finserv MARKETS to determine the maturity amount before investing. Follow the given steps to get the maturity amount.
Choose the customer type. Four types of customer options are provided on the portal:
The type of depositor is important as the interest rates offered are different for all.
Specify the fixed deposit investment amount. The minimum investment for Bajaj Finserv Fixed Deposit is Rs 25,000.
Choose the fixed deposit investment duration. If you want to opt for a cumulative account, a longer tenure fixed deposit will help in multiplying the maturity amount significantly.
Based on input values, the calculator will provide the total amount you will earn on maturity. The interest rate on the fixed deposit of the tenure of your choice will be displayed along with the interest payout, maturity date and the total amount. The maturity for cumulative and non-cumulative fixed deposit schemes will be given separately. In the non-cumulative section, the monthly, quarterly, half-yearly and annual interest payout will be provided clearly. The fixed deposit calculator helps in getting an idea of the potential earnings before you invest.
Cumulative fixed deposit accounts generate compounded returns, which can also be calculated through a mathematical formula. However, calculating the interest manually can be tedious and prone to errors. Here is the formula for compound interest, including the principal amount:
A = P (1 + r/n) ^ (nt)
Where, A = Maturity amount, including interest
P = the principal amount
r = the annual interest rate (decimal)
n = the number of times that interest is compounded per unit t
t = the tenure of the investment
Let us try to understand with an example.
If an amount of Rs 25,000 is invested in a fixed deposit at an annual interest rate of 8.6 percent, compounded yearly, the value of the investment after 3 years can be calculated as follows:
P = 25000.
r = 8.6/100 = 0.086 (decimal).
n = 1
t = 3
If we plug in the figures into the formula, we get the following:
A = 25000 (1 + 0.086 / 1) ^ (1 * 3) = 32,020.60
The investment balance after 3 years would be Rs 32,021. Calculating it was relatively easy as the amount was compounded, but in the case of non-cumulative accounts, it is nearly impossible to calculate manually without making errors.
Using the simple Fixed Deposit Calculator on Finserv MARKETS is the best option to get an accurate result.
Investing in fixed deposits has been made easy by Finserv MARKETS. Investing through the portal saves precious time and lengthy documentation. You can book a fixed deposit in four simple steps.
a) Fill in your personal and beneficiary details. Choose the amount you want to invest, the type of fixed deposit and the tenure.
b) Upload the required documents. Please be ready with passport size photographs and KYC documents like PAN card.
c) After uploading the documents, pay the amount to be invested and book your fixed deposit d) Through Finserv MARKETS you can easily track the returns from your fixed deposit any time of the day.