Nifty99000 100%

Sensex99000 100%

Article rating: No rating
Article rating: 4.8
Article rating: 5.0
Article rating: 3.0
Article rating: No rating
Article rating: 5.0
Article rating: No rating
Article rating: No rating
Article rating: 4.5
Article rating: No rating
Article rating: No rating
Article rating: 4.2
Article rating: 5.0
Article rating: 4.0
Article rating: No rating
Article rating: No rating


Should you still invest in FDs or look at other options!

Author: Debasis Mohapatro/Friday, December 29, 2017/Categories: Fixed Deposits

Should you still invest in FDs or look at other options!

Mumbai: A businessman or a retired individual or a professional with a large corpus always face the investment dilemma of whether to invest in traditional savings instruments like a fixed deposit or to look out for other avenues like debt mutual funds.

While fixed deposits provide safety of capital with assured returns, debt funds have the potential to provide higher returns with better taxation provisions.

“Debt mutual funds are better placed than fixed deposits in the current scenario as these avenues not only provide higher returns on capital, liquidity is also better than fixed deposits of banks,” Rohit Grover, Certified Financial Planner at Mumbai-based advisory firm, MoneyFrog told the Finapolis.

With retail inflation hovering below 4% in last one year, the Reserve Bank of India (RBI) reduced the repo rate by 0.25% to a six year low of 6% in August this year. This has prompted banks to reduce both deposit and lending rates. Currently, the highest card rate offered by most banks doesn’t exceed 7.5% per annum in fixed deposits of various tenures. Compared to the fixed deposits, short-term debt funds have generated returns of around 9% over last one year.

“Partial withdrawal in case of fixed deposits is difficult. Also, in case of partial withdrawal, there is always a penalty imposed on the depositor. Furthermore, the interest earnings on fixed deposits are liable to taxation,” Grover said. Even the interest is calculated after the entire month is completed in case of fixed deposits, he added.

This makes a case for investing in short-term debt mutual funds which generate higher returns than FDs along with higher liquidity.

Talking on the present scenario of surging bond yields, analysts said though higher bond yield will result in lower returns for long-term debt fund products, returns from short-term debt funds are likely to be higher.

“With rising retail inflation, RBI is unlikely to reduce rates in the first half of the year. This is good news for bank fixed deposits as interest rates will not be reduced further by banks. However, compared to returns of short-term debt funds, overall deposit rates on FDs will remain lower,” Grover said.

Print Rate this article:

Number of views (630)/Comments (0)

rajyashree guha

Debasis Mohapatro

Other posts by Debasis Mohapatro
Contact author

Leave a comment

Add comment



Ask the Finapolis.

I'm not a robot
Dharmendra Satpathy
Col. Sanjeev Govila (retd)
Hum Fauji Investments
The Finapolis' expert answers your queries on investments, taxation and personal finance. Want advice? Submit your Question above
Want to Invest



The technical studies / analysis discussed here can be at odds with our fundamental views / analysis. The information and views presented in this report are prepared by Karvy Consultants Limited. The information contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please note that neither Karvy nor Karvy Consultants nor any person connected with any associate companies of Karvy accepts any liability arising from the use of this information and views mentioned in this document. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above mentioned companies from time to time. Every employee of Karvy and its associate companies is required to disclose his/her individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through Karvy Consultants Ltd. This report is intended for a restricted audience and we are not soliciting any action based on it. Neither the information nor any opinion expressed herein constitutes an offer or an invitation to make an offer, to buy or sell any securities, or any options, futures or other derivatives related to such securities.

Subscribe For Free

Get the e-paper free