As a financial unit in the economy, your first step into managing your finances will start by opening a bank account. Once you do so and are promised almost unlimited withdrawals per month, the bank would tell you about Term Deposits. They are basically deposits of mostly fixed sums of money for a fixed time period ranging from a few months to a few years.
Term Deposits are the main source of income for banks and other financial institutions. Though they pay you, the customers, an interest rate on them but banks charge a much higher rate while lending. Hence, the difference in interest rates is how the banks make money. The term deposit interest rates fluctuate depending on general market rates.
For example, when the market interest rate increases it increases the cost of borrowing and therefore banks pay a higher rate on term deposits and vice versa. Generally, the basic type of term deposits isn’t great because they don’t deal well with the inflation problem.
Basically, as an investor you want to ensure that the interest rate offered to you exceeds the inflation rate or else, you’d rather spend your money than invest it. Term deposits have a tendency to do an average job in ensuring this due to their not so high rates. But this is only valid, as long as your time period is a short one.
If you go for a longer term deposit, popularly known as a Fixed Deposit(FD) the interest rates increase considerably. FD rates vary depending on who offers it. You can make an FD with Post office saving banks, commercial banks and non-banking financial institutions (NBFCs). Therefore, ascertaining which scheme to choose can be a tedious task. But not if you look at the rates and make a decision.
THE AVERAGE FD RATE IN INDIA IS 5.5%. As of July 2021, the average fixed deposit interest rates offered for tenors ranging from 7 days to 10 years, for deposits below Rs. 2 crores of major financial institutions, like YES Bank, is 6%. But for NBFCs, the rates are a tad bit higher and hence more lucrative. At Bajaj Finance itself the rates range from 5.65% to 6.75%.
For a term deposit, per say, for a period of 1 year the rates would range from 1.75 to 2.25% on an average. Hence, fixed deposit plans are always a better option due to the FD rates. Here are some key details before the features of fixed deposit plans provided to customers at Bajaj:
- Tenor: The minimum tenor is 1 year and maximum is 5 years for an FD at Bajaj
- Interest Rates: They range from 5.65% to 6.75%
- Deposit: A minimum deposit of Rs 25,000 only is required
- Online Payment Options: Both, Unique Payment Interface (UPI) and Net-banking options are available
- Unique Selling Point: The entire process from end to end is paperless, thus it can be done from the safety of your home
Following are certain benefits of being a Bajaj Finance fixed deposit plan holder:
- High Interest Rates
- Special offers to Senior Citizens
- Benefits to Pravasi Bhartiyas (NRIs)
- High Credibility and Stability
- Flexible Time Frames
- Fixed Deposit Interest Rate Calculator
- Smaller Minimum Deposit
- Digitalized Application Process
- Online Loan against FD
Therefore, if you were to make a term-deposit your best option is a fixed deposit plan for higher rates. However, if you want stability and security while allowing you to set up a corpus in a disciplined manner over a period of time, you can eye another instrument at Bajaj.
The Systematic Deposit Plans (SDPs) launched by Bajaj allow people to make deposits on regular intervals, keeping in mind the erratic availability of funds. In this, the tenure still remains between 12 and 60 months. Depositors have to choose between 6 to 48, for the number of deposits they’d make in a month under their SDPs at Bajaj FD.
When it comes to the maturity, they have an option to choose a single date or a monthly maturity scheme. This way they can ascertain long term and distinguish them from short term goals while making a decision.
Hence, this is all you can know about term deposit rates and better options with higher rates like a fixed deposit plan or SDP.
Gaurav Khanna is an experienced financial advisor, digital marketer, and writer who is well known for his ability to predict market trends.