Return on Investment (ROI) is a primary motivation for individuals to invest. The ROI of each investment instrument is calculated differently. As Fixed Deposits are fixed-income investment instruments, their ROI is calculated with an interest rate. The higher the FD interest rate, the better its ROI is.
Every bank and Non-Banking Financial Company (NBFC) offer a different FD interest rate. Hence, as an investor, invest at a bank that offers the most competitive interest rate. Furthermore, banks offer varying interest rates for different FD schemes.
This blog will help you understand the variability of interest rates across FD schemes.
Different Types of FD Schemes and Their Respective Interest Rates Are as Follows:
Regular Fixed Deposit:
As the name suggests, a Regular Fixed Deposit is a standard FD scheme. Anyone can invest in it. Choose a suitable investment amount within the FD limits that the bank specifies. Opt for any tenure ranging from 7 days to 10 years.
Interest rate:
- A standard interest rate applies to the Regular FD.
- The bank’s FD interest rate is higher than the Savings Account interest rate.
- This enables you to enjoy decent interest rate earnings.
- Select a cumulative or non-cumulative interest payment option with your investment.
Senior Citizen FD:
The Senior Citizen FD is specifically designed to cater to the needs of elder investors. Only senior citizen investors can invest in this FD scheme. This scheme offers the same investment amount and tenure options as a Regular FD. The investors enjoy tax benefits on the principal amount and interest earnings.
Interest rate:
- The government has made it mandatory for all banks and financial institutions to offer a higher interest rate for Senior Citizen FD investors.
- The government made this decision considering that investments often serve as the primary source of income for these investors in their old age.
- This ensures the investors have substantial earnings in their hands to meet their needs.
Auto FD scheme/Flexi FD scheme
An Auto FD scheme or the Flexi FD scheme is a savings cum investment option. The FD scheme is linked to your Savings Account. As the Savings Account balance exceeds the bank’s threshold, the excess amount automatically gets invested in FD. This allows you to enjoy the flexibility of a Savings Account and, at the same time, benefit from the higher bank’s FD interest rate.
Interest rate:
- The same interest as the Regular FD applies to this FD scheme.
- This rate applies only to the excessive amount transferred to the FD Account.
- It does not apply to the entire Savings Account balance.
FD Plus
Banks know that investors want to maximise their earnings, which is why they have introduced specialised FD schemes. FD Plus is one such specialised FD scheme. The minimum investment amount of this scheme is higher. There is no option to pre-withdraw this deposit.
Interest rate:
- The FD Plus scheme draws a higher interest rate.
- Investors can choose between simple and compound interest options.
- Use an FD calculator to see how the higher interest rate of FD Plus impacts your returns.
- Log on to any banking and financial website/mobile app to access the FD calculator.
NRI Fixed Deposit:
The Indian banking and financial system has created NRI FDs for Indian nationals living abroad. Any NRI/OCI/POI can invest in it. NRE, NRO, and FCNR are the different NRI FD schemes available. Each scheme offers different features and benefits in terms of denomination, repatriability, and taxation.
Interest rate:
- A specific interest rate applies to these deposits.
- The interest rate varies from one bank to another, so choose a bank offering the highest interest rate.
- The interest earnings also vary depending on the denomination of the FD Account.
Summing It Up
FD is a fixed-income investment instrument. Its ROI is calculated based on an interest rate. All banks and financial institutions offer different interest rates. Invest with a bank that offers the most competitive interest rate and valuable features. This makes your investment worthwhile.
The interest rate also varies across FD schemes. Some schemes offer higher interest rates based on the investor’s age, while others provide competitive interest rates to all investors owing to their features.