How to Choose the Right Fixed Deposit Scheme

Posted in Fixed Deposits By Sajhyadri Chattopadhyay - Feb 8,2023
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“Want to save your money? Go for fixed deposits yaar!”

Be it from your parents, peers, or even your white-collared financial advisor, you have most likely heard this. The nudge towards fixed deposits tends to be the final call whenever the topic of parking your savings has come up. No other financial tool has gained this much popularity in India than fixed deposits. These traditional savings schemes are often chosen without much thought, and why not? You dump your disposable income in an FD account, and it grows at a pre-determined rate of interest, simple!  

According to a survey by SEBI, over 90% of Indian families would rather keep their surplus funds in fixed deposits. In comparison, below 10% of citizens would choose stocks or mutual funds. Yes, the fear of volatility and other market risks makes many Indians turn away from Dalal Street, but what is this love affair with FDs? What mantra keeps luring Indians to this financial tool in the age of crafty cryptocurrencies and other money-making magnets?  

Weighing the Scales

The popularity of fixed deposits is still an untested matter, but there are a few factors that a wise financial planner goes over to make sure that they have chosen the best scheme. The journey to this conclusion will take you through the following crossroads that decide an FD’s utility – 

1. Interest Rate  

Be it a traditional bank or an NBFC, always choose the financial institution ready to offer you a higher interest rate on your deposit. While interest rates generally vary from bank to bank, the schemes with longer tenors usually tend to offer you higher rates of interest. Moreover, this rate also varies with the FD account holder’s age. Both banks and NBFCs offer senior citizens an additional rate on top of the interest offered to general citizens. 

2. Loan Facility  

Another unique benefit of FDs that draws customers to it is the loan facility. You might often face an uncertain situation in life where you urgently need a sizable amount of money. With a fixed deposit, you can get a loan against your FD account. Basically, the amount in your FD account acts as collateral, in case you are unable to repay the loan. Hence, remember to choose an FD scheme that offers you the maximum value against your deposit’s sum. 

3. Lender’s Credibility 

Before opening a fixed deposit, remember to check the credibility of the financial institution where you are opening the account. Sure, FDs are comparatively free of risks, but still, wouldn’t you want to save your money in a place that is more reputed? Always check out a bank or NBFC’s credit rating from CRISIL or ICRA when you select an FD scheme. In terms of credit quality, MAAA is the highest rating that ICRA offers, while CRISIL’s highest rating is FAAA.   

4. Premature Withdrawals  

Sometimes, you could be faced with some financial urgency, but you are not comfortable with the idea of debt and so you decide against taking a loan. Rather, you would prefer to withdraw the sum of money from your fixed deposit account. Banks as well as NBFCs will charge you a penalty upon withdrawing your deposit prematurely, typically ranging between 0.5% and 3% of the interest rate. Some financiers may charge you less, while some will charge you more. Always remember to check the penalty charges before choosing an FD. 

5. Cumulative vs. Non-Cumulative Plans 

If you are just looking to save money for the long run and are fine with getting a single pay-out of returns when your deposit matures, then you can choose cumulative FD plans. Conversely, if you want to use your fixed deposits to earn a secondary source of income, with regular periodic returns, you can choose a non-cumulative FD. However, do remember that the interest on cumulative FDs will increase over time, as it compounds from your savings. Hence, if your end-use suits it, remember to opt for a cumulative scheme to earn better returns.  

Better Call NBFCs! 

In India, NBFCs have evolved at a breakneck pace over the recent years,. Hand in hand, they have gained an immense popularity as a safe, economic, and approachable alternative to traditional banks. As mandated by the RBI, all NBFCs authorised and registered under its governance have a proper investment-grade rating. When it comes to saving your money with fixed deposits, NBFCs tend to stand out as the clear winner for several reasons –  

  • Higher Interest Rate

NBFCs generally offer you higher interest rates than banks on your fixed deposits. NBFCs enjoy greater flexibility in terms of rules and restrictions. Hence, they can offer more competitive rates to customers.  

  • Safe and Secure

Different NBFCs get accredited by reputed credit rating agencies, mainly ICRA and CRISIL, who provide them with safety ratings depending on their credentials and reputation. NBFCs with ratings over AAA are widely favoured as the safest for opening FD accounts.  

  • Lenient Eligibility Criteria 

NBFCs have comparatively lenient eligibility criteria than banks, which helps to uplift them as a go-to financial choice for consumers. People can choose from a wide range of deposit types, tenors, and interest rates from such entities.  

  • Minimum Documentation 

NBFCs ask you for only a minimum set of documents before opening your FD account, unlike banks, which often have a lengthy process of paperwork and formalities.  

  • Better Customer Service

NBFCs usually offer you better customer service and outreach abilities. Whether you have any queries regarding your account or face any issues while withdrawing, they will help you out as soon as possible.  

  • End-to-End Online Process 

In today’s digital world, NBFCs are ahead than banks, as they provide you higher ease of access. From the comfort of your home, you can easily open a FD account in few quick steps online.  

A Generation’s Saving Choice

As a population obsessed about saving for weddings, festive seasons, buying a house, etc., is it too surprising that most Indians just go “say no more” when it comes to choosing a safe and secure savings option? This time-tested financial instrument has been the fan-favourite of the entire nation no matter what new saving schemes crop up, whether from banks or non-banking financial companies (NBFCs). Moreover, FDs are liquid schemes, ensuring that an emergency fund is at your disposal when needed.  


What’s more, you can also cut down on your losses with a tax-saving FD. Even beyond the rates and tenors, choosing the correct fixed deposit plan takes some research; the best plan for you will depend on the benefits you prefer. If you have some surplus to park somewhere and feel wary about stocks or other investing schemes, simply head over to Bajaj Markets, and explore the multiple options under Fixed Deposits. Keep your money safe, earn moderate returns, and do it all with just a click! 

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