Generally, people prefer to have safe investments considering the lowest risk and guaranteed returns. When we think about the safest investments, fixed deposits is the first thing that pops up in our mind.
Notably, fixed deposits are safer and that is because of DICGC i.e. Deposit Insurance and Credit Guarantee Corporation. Under this, a fixed deposit of up to Rs.500000 is insured.
This norm is providing security against uncertainty. But, insolvency has become the real problem, especially in recent times. So, to minimize default risk and for maximum returns, the following things need to be considered before doing FD:
The first and the most important thing that should be checked is the conditions and benefits provided by different banks for fixed deposits. As years for maturing, FD may differ across banks along with benefits. Some banks may provide a partial amount withdrawal facility in times of emergency before the maturity period and some banks don’t.
On a prior basis, you have to check the details of overdraft/loan facility provided by banks against fixed deposits. Benefits and rates of interest may vary from bank to bank.
You also have to check interest rates provided by the different banks along with risks. In the case of public banks, interest rates are generally lower, but they are considered less risky. Because, in case if public sector bank becomes insolvent, RBI can step in and merge the bank, as observed in the past. On RBI’s website, the names of those banks are mentioned.
Then, comes private sector banks, the safest in the sectors are considered to be HDFC and ICICI. Recently, these banks have been awarded for their work and RBI too considered them as systematically important. So, we can conclude they are the private sector’s fastest-growing banks.
Apart from that, Small Finance Banks can also be considered a good option for investing. They can provide higher interest on fixed deposits. If you doubt their safety, then they are regulated by RBI just like commercial banks and they also have to follow all the norms set by RBI.
At last:
Diversified investments are considered a great strategy to minimize risks. If you are adding fixed deposits in your portfolio, then ideally the amount should not be greater than 5 lakhs as up to 5 lakhs the amount is insured. Other investment options like mutual funds, bonds, etc. can be included in a portfolio. Along with it, stock market investment is a good option too and can be considered for inclusion in the portfolio as in recent times, it has made great progress.
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