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Whether you are an aggressive or conservative investor, a fixed deposit must occupy a prominent slot in your investment strategy. FD returns are always guaranteed, enabling investors to plan their future.

You can invest in an FD for any term between one (1) year and ten (10) years. And if you are lucky to get the best FD interest rates, they may outshine most other investment methods.

The following sections will discuss some proven strategies to increase your FD returns.

8 Proven Strategies to Increase FD Returns

Trust Corporate FDs

Of all fixed deposit schemes offered by financial institutions in India, corporate fixed deposits offered by housing finance companies (HFCs) provide the best FD interest rates. For instance, while most banks provide interest rates between 3% and 5.80%, HFCs’ minimum interest rate usually starts at 5.84% and reaches the crescendo at 7.25%.

When your investment amount is big, even a 1% difference in the interest rate can make a huge difference in FD returns.

Scan Multiple Financial Institutions Before Investing

You can find information about corporate FD returns by visiting the respective financial institutions’ websites. 

However, do not get convinced if a financial institution offers unbelievable interest rates. It might be a trap.

So, it is wise to track various metrics like the company’s financial track record, balance sheet, loan book, deposit base, credit rating, etc., in conjunction with the best FD interest rate.

A good strategy to minimize the risk is to divide your net investment amount among various financial institutions.

Cumulative FDs Fetch Higher Returns

Cumulative fixed deposits provide you with the principal and interest on the maturity date.

The biggest benefit of a cumulative deposit is that, unlike non-cumulative deposits, cumulative deposits provide compounded returns. So, your principal and the interest will earn interest every year.

Divide the Investment Amount into Small Portions

It’s a fact that a cumulative fixed deposit fetches you higher FD returns. However, you have to pay the penalty if you need money before the FD matures. So, it is better to ladder your investment by reducing maturity.

For instance, if you have INR 5 lakh to invest, invest 2 lakh in a 10-year FD, 1 lakh in an 8-year FD, and so on. This will ensure you get adequate money in your wallet at fixed intervals.

Avoid Premature Withdrawals

Since fixed deposits are a semi-liquid investment option, investors close their FD accounts prematurely on facing a financial emergency. However, refrain from withdrawing the FD amount prematurely if you want the best FD returns.

Instead of withdrawing the FD amount prematurely, opting for a loan against FD is a sensible decision. A loan against FD allows you to get low-interest funds from the financial institution and repay the amount before the FD maturity date.

15G/15H Saves Taxes

Financial institutions generally deduct 10% from your interest income if your net interest income exceeds a stipulated amount. For corporate FDs, the stipulated amount is INR 5,000 every financial year.

However, you can submit 15G or 15H to stop the deduction if your total income does not come under the tax bracket.

Increase the Term

You can get the best FD interest rate by investing in long-term deposits. Since long-term deposits give more room to financial institutions, they offer better FD returns to such investors.

Analyze the Credit Rating of the Financial Institution

Credit rating agencies like CARE and CRISIL evaluate the creditworthiness of corporate institutions and assign ratings. You must check the financial institution’s rating before investing your hard-earned money.

Check whether the rating is above CRISIL FAA or CARE AA or not before investing. Any rating above the mentioned ones is considered good.

Conclusion

The best FD interest rates ensure you get the most from a fixed deposit. Compare several financial institutions and choose the best one to get decent FD returns.