Fixed Deposits (FDs) are a popular investment option for risk-averse investors. This investment option offers guaranteed returns over a period of time. While traditional banks offer competitive interest rates, small finance banks often offer higher returns on FDs.
Here's how you can make the most of your fixed deposit investments with small finance banks.
Compare interest rates
The first step is to compare interest rates on fixed deposits offered by different small finance banks. Interest rates can vary significantly, so doing your research in advance can help you get a higher return. Websites and financial platforms often list and compare current interest rates, making it easier to find the best deal.
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Consider different holding periods
Small finance banks offer different interest rates based on the tenure of the fixed deposit. Interest rates may vary for short-term fixed deposits (7 days to 1 year) and long-term fixed deposits. Choose a tenure that matches your financial goals while maximizing your interest earnings. Medium-term fixed deposits (1-3 years) may offer the best interest rates.
Take advantage of special schemes
Small finance banks often introduce special offers that offer higher interest rates for certain periods or to certain customer segments, such as senior citizens or new customers. Keep an eye out for such offers and take advantage of them to boost your revenue.
Reinvest interest income
Choose a cumulative term deposit where the interest earned is reinvested, allowing you to benefit from the power of compound interest, resulting in higher returns in the long run. Non-cumulative term deposits, where interest is paid periodically, do not offer this advantage.
Explore loyalty rewards
Some small finance banks offer loyalty benefits to existing customers, such as higher interest rates on fixed deposits. If you already have an account with a small finance bank, enquire about any additional benefits you can receive when you open a fixed deposit.
Small finance banks offer higher yields, but be sure to evaluate their financial stability and reliability. Look for banks with good credit ratings and good customer reviews to minimize risk. Choosing the right small finance bank and the best fixed deposit terms can significantly increase your yield and make your money work for you better. Stay informed and make your decision based on thorough research to maximize your investment potential.
Data from individual bank websites as of 16 July 2024. Maximum offered interest rate is taken into account. Interest rates are for regular fixed deposit amounts between 1 crore and 3 crore rupees. Compiled by BankBazaar.com.