The Life Savers Called Online FDs

wealthymattersThe one good think about fixed deposits is the absolute predictability of returns, as long as they are not closed prematurely. Add to this that unlike a lot of other fixed income instruments, fixed deposits are available for all tenures upto 10 years, and you can now use fixed deposits to design your own financial products.

The only drawback is the extremely low deposit insurance  in India.The Deposit Insurance and Credit Guarantee Corporation provides insurance to each customer of a Scheduled Bank for deposits up to Rs 1 lakh in case of  bank failure. This limit is applicable across all the deposits, including savings, current, fixed and recurring. This limit remains Rs 1 lakh even if the sum of all deposits (including accrued interest) exceeds the same. Worse, non-scheduled banks ,companies and other institutions offering fixed deposits don’t provide this small comfort either. Of of what use is predictability of returns if basic security and return of capital is not guaranteed ?

Now the workaround to this problem is to ensure that at no point during the tenure of our deposits with any bank ,would the total balance exceed 1 lakh.This often means dealing with multiple banks. And when some banks routinely offer better interest rates than others, it means seeking them out to maximize returns. Moreover, if you are laddering deposits, locking in higher recurring deposit rates etc., you’re really compounding your work. And heaven forbid you don’t live anywhere but in the big cities with dozens of banks with branches next door to each other in your neighbourhood. Else the cost of managing your deposits would make all the attempts to maximize returns come to a copper. Busy work that gains you nothing.Wastes your time and energy and gets in the way of you doing more productive things.

Now there is a real alternative to all this running round. Especially when the banks that offer better interest rates, start going digital. You get to book fixed deposits online. Close them online and transfer the money wherever you want over the internet. And it doesn’t matter if the bank has a better presence 3 states away and no presence in your neighbourhood. Online Fixed Deposits have become real lifesavers. Now its relatively more comfortable to do an internet search to compare bank fixed deposits, use online fixed deposit calculators to calculate returns, open a fixed deposit account and close them at any hour of the day or night ,from wherever, as per your convenience. Now no more dropping everything and rushing to the bank branch before closing time. And its way, way ,easier to open upteen number of FD accounts.

About Keerthika Singaravel

4 Responses to The Life Savers Called Online FDs

  1. Ashish Kumar says:

    What about time deposits in the post offce. I read somewhere that they have sovereign guarantee for the full amount of the deposit.

    • Keerthika Singaravel says:

      Yes they do.
      However, this guarantee comes at the cost of the interest you could get from banks.
      And a great deal more inflexibility.
      BTW, if you are the same Ashish Kumar who has been e-mailing me, you’d have access to various RBI and government/PSU bonds with the same sovereign guarantee that PO Small Savings Schemes offer and possibly better interest.
      Shop Around.

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