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Explained: India's decades-long love affair with FDs

By Finserv MARKETS - Aug 1,2019
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Explained: India's decades-long love affair with FDs

Fixed Deposits have always remained a favourite investment tool in the Indian household. Being conservative in their outlook when it comes to investing, they are always on the search for safe investments with high returns. Indian investors are wise to not expect returns at par with market-linked instruments from FDs, but still, they consider it as the safest asset class that offers decent and assured returns. And it’s easy to maintain because it’s a one-time investment unlike SIPs, ULIPs, pension plans and endowment plans.

In 2017, the Securities and Exchange Board of India (SEBI) formally announced India’s decades-long love affair with FDs. It carried out a survey and found out that a mind-boggling 95% of the Indian household preferred to invest in fixed deposits. The love has only grown stronger as FD interest rates have increased in recent times. Currently, most banks are offering fixed deposit returns in the range of 6.5-7.5%. However, finance companies are providing even higher FD interest rates; ranging between 7.5-9%.

In fact, FDs available on Finserv MARKETS offers one of the highest fixed deposit interest rates in the country in the range of 8.00-8.95%. Fixed deposits available on Finserv MARKETS have been given a ‘FAAA’ rating by CRISIL, which is the highest rating for FDs in India.

Why do Indians still love FDs?

We Indians want to keep it simple when it comes to investments. Safety, transparency, guaranteed returns, liquidity and ease of investment are more important than the promise of higher returns that comes with potential risks. Let’s get into the details and explore the typical Indian mentality when it comes to finance to understand why Indians love fixed deposits the way they do.

Easy availability of credit

If you have a fixed deposit in a bank, you don’t have to furnish a long list of documents or go through long processing time to get credit when you need it. Having a fixed deposit is the surest way to ensure approval for credit cards, personal loans and overdrafts.

You don’t enjoy the same privileges when you invest in stocks or mutual funds. Very few banks offer loans against securities and the loan value may not be more than 50% of the value of the securities. In comparison, you can get loans ranging from 80-100% of the FD value when you take a loan on fixed deposits. Also, loans are available at lower interest rates when taken against FDs. At FINSERV Direct, you can take loan upto 75% of the amount in a cumulative FD.

Easy to invest and understand

It hardly takes a few minutes to invest in fixed deposits, especially when you apply online. To promote online transactions, since they are faster and demands low overhead costs, some banks and finance companies have special offers for those who invest in FDs online.

Even a layman can understand how a fixed deposit works. FD interest rates are clearly declared by the financial institution and you can calculate the returns or maturity value based on the rate of interest and tenure. There are no hidden charges and nothing is left at the mercy of market forces, government policies or the interest regime, especially if you are investing in a fixed deposit with FAAA CRISIL rating. Like the fixed deposits available on Finserv MARKETS.

Fixed deposits are also popular because they are a one-time investment; you can just make the payment once and leave the ‘money-tree’ to grow on its own. That is why many in India consider FDs as safe investments with high returns.

Flexibility and easy withdrawal

There are other risk-free investment tools such as government bonds and treasury bills that also provide assured returns but they come with long lock-in periods. On the other hand, fixed deposits have tenure ranging from a week to 10 years depending on your investment horizon. You can also liquidate or ‘break’ FDs whenever you have an emergency need for funds.

It’s not difficult to understand India’s old love affair with fixed deposits. The primary reasons are that it’s safe, flexible, easy to invest and offers assured returns. So, when you are making a one-time investment for the future, nothing can beat a fixed deposit. However, ensure that the FD is reliable like the fixed deposits available at Finserv MARKETS, which come with stable ICRA MAAA and high CRISIL FAAA ratings.

Finserv MARKETS, from the house of Bajaj Finserv, is an exclusive online supermarket for all your personal and financial needs. We understand that every individual is different and thus when you plan to achieve your life goals or shop for the gadget of your dreams, we believe in helping you Make it Happen in a few simple clicks. Simple and fast loan application processes, seamless, hassle-free claim-settlements, no cost EMIs, 4 hours product delivery and numerous other benefits. Loans, Insurance, Investment and an exclusive EMI store, all under one roof – anytime, anywhere!

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522