Fixed deposits (FDs) are one of the most popular investment instruments in India, particularly among risk-averse investors. However, it could be challenging to select the right bank while investing your money in fixed deposits. Often people choose their existing banks to park their money in FDs, but what is the best way out and how should one decide where to save one’s money?
Investing in an FD, in fact, depends on many factors such as the interest rate, safety of your investment, and your personal preferences. Here are some tips to help you take a better decision:
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Interest rate
Typically, smaller banks offer higher interest rates than larger banks because they are more focused on attracting deposits. However, it’s essential to compare the interest rates offered by different banks and ensure that the higher rate offered by a small bank is worth the potential risk.
Safety
One of the most critical factors to consider when investing in fixed deposits is the safety of your investment. In general, larger banks are considered safer than smaller banks due to their size and financial strength. Large banks are more likely to be able to weather economic downturns and financial crises than smaller banks.
Personal preferences
Your personal preferences and financial goals will also play a role in your decision. If you value the convenience and accessibility of a larger bank, you may prefer to invest with a big bank. On the other hand, if you want to support local businesses or have a relationship with a small bank, you may prefer to invest with a small bank.
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Adhil Shetty, CEO, Bankbazaar.com, says, “Typically, smaller banks offer higher interest rates than larger banks. They need to remain competitive and attract deposits from the market. Today, pretty much every bank offers a rate of 7% or more on select tenors. This is a good time to lock into these tenors. It’s essential to compare these rates. We often put out detailed tables to help consumers see interest rates across the industry. You also need to see if a higher rate is worth the risk.”
Finally, there is no clear-cut answer as to whether you should invest in small or big banks for fixed deposits. It’s important to weigh the interest rate, safety, and personal preferences before deciding. You should choose a bank that aligns with your financial goals and priorities.
