Business

Fixed Deposits: A Great Combination of Safety and Returns

Fixed deposits are among the most popular investment instruments in India. This is because they provide both the safety of your capital and a guaranteed return. While the interest rate offered by banks on their fixed deposits is falling, NBFC firms like PNB Housing still offer a substantially higher return on the fixed deposits.

Investing in a fixed deposit offers a plethora of advantages. These include:

  • High safety assurance: With PNB Housing’s fixed deposit (FD), you can rest assured that your capital is safe and carries a very low credit risk as indicated by the FAAA/Negative rating given by CRISIL to this investment.
  • No tax deduction: You need not worry about tax being deducted on the interest paid on your fixed deposit, for up to ₹10,000 in returns.
  • Loan facility: If you have a pressing need for cash, you can avail a loan against your fixed deposits with PNB Housing. You are eligible for a loan of up to 75% of the total principal deposit. The interest rate on this loan is lower than most other sources as the fixed deposit acts as collateral on the loan.
  • Premature cancellation: Further, you also have the option of premature withdrawal from your fixed deposit account any time after three months from the date of deposit. This ensures that you do not face any liquidity problems. That said, it is better to keep your deposit for the agreed term, as a premature withdrawal results in an interest rate penalty. Interest at 4% per annum is paid if the withdrawal is made within six months from the date of deposit. For premature withdrawals made after six months, a 1% deduction on interest rate is applicable.
  • Nomination: Nomination facility is available on all PNB Housing fixed deposits as required by the guidelines provided by the National Housing Bank. In the case of a depositor’s unfortunate demise, the nominee will be paid both the principal and the interest due.
  • The higher interest rate for senior citizens: PNB Housing offers a 0.25% higher interest rate on senior citizen fixed deposits.

Building up a corpus

The great combination of safety and returns provided by fixed deposits make them an ideal choice for building a corpus at low risk. One of the ways to do this is to choose a cumulative fixed deposit with a 10-year term and let the best FD rates in India compound over the years. The magic of compounding will ensure that the funds grow rapidly without taking on any undue risks. This is a great strategy when saving up for a big expense like purchasing a house or the education for your kids.

Post-retirement savings

The combination also makes it a great choice for post-retirement savings. When one is not actively earning anymore, limiting the risk exposure on their investment becomes paramount. At the same time, it is important to generate a decent return as the investments may need to last for a long time given the high life expectancy in India. PNB Housing offers among the best FD rates in India and is highly secure at the same time. Non-cumulative fixed deposit can be used to generate a regular income from the retirement corpus you would have already built up.