Safety and Security: Why Fixed Deposits are a Low-Risk Investment

A fixed deposit is one of the most preferred investment avenues in India. In fact, data from the Reserve Bank of India (RBI) reveals that about ₹10.27 trillion was invested in bank deposits in the fiscal year 2023. (Please include the source in body copy with link)This figure raises a question: What makes fixed deposits so popular?

It is not just about the guaranteed returns they offer but also the simplicity and the financial stability they provide. Keep reading to learn why fixed deposits are a low-risk investment and a preferred choice for many investors.

Tailored interest rates

Fixed deposits offer higher interest rates than savings accounts and extend more favourable rates to senior citizens. You also have the option to book tax-saving FDs to save on taxes while earning predictable returns. Note that the tax-saving FD investment duration or lock-in period is five years, which means you need to have a long-term commitment.

No interest rate fluctuation

One of the major benefits of fixed deposit is the guarantee of returns. Once you lock in your funds, the interest rate remains constant, unaffected by market volatility. For investors, this means the assurance of knowing exactly how much they will earn from their investment. This stability reflects FDs’ safety, security, and low-risk nature.

Insurance safety net

In India, the Reserve Bank of India’s Deposit Insurance and Credit Guarantee Corporation (DICGC), insures fixed deposits. Each depositor in a bank is insured up to a limit of ₹5 lakh for both principal and interest amounts of their FDs and savings account balance combined. Such insurance guarantees that your hard-earned money remains secure and enhances the reliability of fixed deposits as an investment choice.

Enjoy your returns with multiple payout options

As an investor, you can opt for cumulative FDs or non-cumulative FDs. A cumulative FD reinvests your interest earnings and allows you to enjoy compounded growth until maturity. A non-cumulative FD pays out interest at regular intervals, such as monthly, quarterly, or annually. This option suits those who need a steady income stream.

This flexibility means whether you are looking to grow your savings or need consistent income, FDs can be easily customised to meet your financial goals.

Loan against your FD account

Many banks allow you to avail a loan of up to 90% of the FD amount. This facility gives you liquidity without having to break the deposit prematurely and preserve the interest earnings. Thus, your FD account not only offers stable returns but also acts as quick financial aid in times of emergency.

This dual functionality is a key reason why fixed deposits are considered a low-risk investment. After all, you don’t have to compromise your investments’ growth or resort to high-interest options that might affect your financial stability.

Advantages of auto-sweep facility

The auto-sweep facility offered by INDIE Fixed Deposits links your savings account with your FD. When your savings account balance exceeds the threshold of ₹20,000, the excess money automatically transfers into an FD in multiples of ₹10,000 and earns higher interest. Thus, your idle funds don’t just sit in your account but actively generate more income.

You can even pay directly from the FD when your account balance runs low. Book your INDIE Fixed Deposit online today and enjoy an interest rate of up to 7.75% p.a.

Digital revolution and FDs

The digital revolution has transformed fixed deposits and enhanced their safety and accessibility even more. Now, with mobile banking apps such as INDIE by IndusInd, you can instantly book a fixed deposit with a 100% paperless process and manage your investment securely. This digital convenience minimises errors and fraud and caters to those who prioritise simplicity and efficiency.

Key takeaways

Features like stable returns, protection from market volatility, and DICGC insurance coverage make fixed deposits a low-risk investment. Combined with online accessibility, auto-sweep facility, and additional benefits, FDs can suit a range of investors, particularly those who value stability over high risks or speculation.

With all these advantages, a fixed deposit can be a dynamic component of your financial portfolio and overall investment strategy.

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Eden Ellis

Eden Ellis, a Business Strategist with an MBA, specializes in corporate strategy, market analysis, and entrepreneurship. His experience with multinational corporations and startups provides a unique lens through which he examines business dynamics, offering actionable insights for companies navigating the complexities of the modern business environment.
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