Money lying idle in a bank account earns nominal interest. Financial experts advise investors to part their wealth in schemes that offer better returns. People looking for higher returns than a savings bank account can invest in stock and debt markets but they also need to be prepared for fluctuations in income, say experts. However, those looking for assured returns should park their funds in fixed-income schemes such as fixed deposits (FD), recurring deposits (RD) and Public Provident Fund (PPF) accounts, which guarantee a specific rate of return on investment.
Given below are details about fixed deposit, recurring deposit and PPF accounts:
Fixed deposits allow a customer to invest a particular amount for a pre-determined, specific period of time. Fixed deposits are offered by banks as well as companies. However, fixed deposits offered by a company - called corporate or company fixed deposits - do not guarantee returns. The returns on corporate fixed deposits depend on the profit that a company makes.
Bank fixed deposits assure of returns against a defined lock-in period. At the time of maturity of deposit, the investor can either withdraw the money or re-invest it.
Bank fixed deposit rates 2018
All leading commercial and small finance banks offer the option of fixed deposit account. Interest rates vary depending on the bank and the tenor of the deposit. For example, State Bank of India (SBI) offers an interest rate of 6.80 per cent on a fixed deposit maturing in one to less than two year maturity. HDFC Bank offers a 7.30 per cent interest on a fixed deposit of one-year tenure. ICICI Bank offers a return of 6.90 per cent on a fixed deposit maturing in a term of one year to 389 days.
Small finance banks offer higher FD interest rates than mainstream commercial banks. For example, Jana Small finance Bank offers an interest rate of 8.50 per cent on fixed deposits maturing in 181 days to 365 days and more than one year up to two years. Ujjivan Small Finance Bank pay interest at the rate of 8.30 per cent on a fixed deposit maturing in one to two years. Investment in a fixed deposit of one to two years in Suyoday Bank fetches interest at the rate of 8.50 per cent.
Post office fixed deposit rates 2018
India Post, which runs the postal network of the country, also allows customers to open fixed deposit account with guaranteed returns. On post office fixed deposits maturing in one, two, three and five years, the annual returns offered are 6.9 per cent, 7 per cent, 7.2 per cent and 7.8 per cent respectively.
Recurring deposits allow customers to build on savings in small, periodic installments. As compared to an FD, RDs require investors to contribute a particular amount on a periodic basis. Thus, RDs offer the facility of saving money in installments while offering attractive rates of interest on your investment.
Recurring deposit rates 2018
Recurring deposit interest rates are usually the same as fixed deposit returns. On a recurring deposit maturing in one to less than two years, SBI pays interest at the rate of 6.80 per cent. HDFC Bank offers 7.30 per cent interest on a recurring deposit of 12 months while ICICI Bank pays an annual return of 7.10 per cent on a recurring deposit of 15 months.
Suyoday Bank and Equitas Small Finance Bank pay interest at the rate of 8.50 per annum on recurring deposits of 15 months. Jana Small Finance Bank offers 8.5 per cent annual interest on a recurring deposit with tenures of six-12 months and more than 12- 24 months.
Post office recurring deposit rates 2018
India Post pays interest at the rate of 7.3 per cent on recurring deposit accounts.
Interest rates on fixed deposits and recurring deposits keep changing from time-to-time.
Public provident fund scheme
Government-run PPF is a long-term investment option. It offers safety with attractive interest rates and returns that are fully exempted from income tax. Investors can invest a minimum of Rs. 500 to a maximum of Rs.1,50,000 in one financial year. You can get the facilities of loan, withdrawal and extension of the PPF account.
The biggest advantage of a PPF account is that it comes under the exempt, exempt, exempt (EEE) category of tax status. This means that returns, maturity amount and interest income are exempt from income tax. Deposits qualify for deduction from income under Section 80C of Income Tax Act.
You can open PPF accounts with leading banks. India Post also offers the option of opening a PPF account.
PPF interest rates 2018
Interest rates on PPF for the quarter ending December are fixed at 8 per cent per annum. However, rates of return on small saving schemes like PPF are changed every quarter.