Amid lowering bank fixed deposit (FD) interest rates, investors with low risk appetite are advised to look at other benefits of bank FD before switching to other option. During the Covid-19 pandemic spread, banks have innovated some bank FDs where the investor is eligible for insurance to healthcare benefits. So, investors need to look at the benefits of bank FD beyond interest rates.
Speaking on bank FD investments Praveen Kutty, Head Retail Banking at DCB Bank said, “We have seen that, banks’ fixed deposit growth has remained healthy despite the interest rates. They have been a reliable investment avenue for investors with low-risk appetite. During the pandemic, many well-off customers didn’t have avenues to spend. Such accumulated funds were preferred to be parked as fixed deposits as other asset classes gave unsteady returns. Another reason is the equity markets. Many investors are looking at fixed deposits (FDs) for diversification as markets are at their all-time high.”
Favouring bank FD for diversification of one’s portfolio SEBI registered tax and investment expert Jitendra Solanki said, “Bank FD gives assured return to the investor so one should have bank FD in one’s portfolio. It emerges as smart choice when the stock market goes volatile as we have been witnessing in the last one and half months.” Solanki said that overdraft facility to income tax benefits are some other advantages that is beyond bank FD interest rate. So, one should look at these added advantages as well while investing in bank FD.
Asked about the benefits of bank FD beyond interest rate both experts listed out the following:
1] Income tax benefit: Under Section 80C of the income tax act, India banks offer tax exemption on the long-term bank FD returns. These tax-free bank FDs have tenor of 5 years and above.
2] Overdraft facility: One’s bank FD can be used as an avenue for fund raiser as well. Banks offer overdraft facility against bank FD.
3] Value-added benefits: There are fixed deposits, which come with free life insurance without any medical check-up wherein the cover equals the FD amount (this is subject to time and age limit and maximum insured amount). On the other hand another FD option allows you opt for free medical consultation on a virtual platform, which is both comforting and safe. These benefits are mainly available in value-added bank FDs.
4] Guaranteed return: Bank FD interest rate doesn’t fluctuate like small saving schemes. So, bank FD is an investment instrument that gives assured return to the investor.
5] Ease of investment: In this era of Digital India, an investor need not to stand in cue for hours to open bank FD account or deposit money in one’s bank FD. One can do these things by using net banking facility. So, bank FD provides ease of investment to the investors as well.
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