As one section of investors continues to worry about the rising rates of interest on various loans like the car loan, home loan etc, there is another section that is rejoicing this hike as it eventually leads to a rise in the interest rates of fixed deposits offered by banks in the country. In such a scenario, people are in a fix wondering if they should continue with their fixed deposit or choose to opt out of it. While it may be difficult to seek for a definite answer to these queries, the answer lies in your needs, requirements and expectations with respect to your fund. If your fixed deposit is nearing its period of maturity, then it would not make any sense to break it now as you would only lose some of your interest income. It is better to let the tenure complete to avoid losing out on interest due to premature withdrawal of funds, especially since such a decision would dampen your gains that you have earned from higher deposit rates. The bank can also impose a penalty on the premature withdrawal of funds. In case there is a financial contingency as a result of which you need to break your fixed deposit, then the high rates of interest on the deposit may compensate for the penalty imposed on premature withdrawal. However, if this is not the case, then do not opt for premature withdrawal as an option. Sometimes, banks can be flexible by waiving off penalties if there is an unavoidable circumstance of contingency like a sudden illness, death and so on. However, since there is no applied rule on the same, then it is up to the bank’s discretion to decide the same and the customer must not leave any stone unturned in convincing the problem on the genuine nature of his problem.
Customers are always pulled into the debate of which investment option is better: company fixed deposits or bank fixed deposits. While company fixed deposits definitely offer higher rates of returns than that offered by banks, bank fixed deposits are far less risky than company fixed deposits. One needs to conduct research on the financial status of the company and try and understand why such an organization is raising funds from the public. You also need to find out the rating of such a firm as it helps you assess the worthiness of the company. Generally, higher the rating, lower will be your return and vice-versa. Bank fixed deposits are best suited for individuals who do not have a high risk appetite, especially senior citizens. Some banks offer senior citizens higher rates of interest than that offered to regular citizens as these people depend on the interest as their income. Further, bank deposits are also protected under the Deposit Insurance and Credit Guarantee Corporation or the DICGC for investments as high as Rs. 1 lakh adding more security to the already safe bank deposits. Non-convertible debentures of companies are a safer bet than company fixed deposits as they are a part of secured debt instruments. Sometimes, although companies may offer higher rates of interest for their fixed deposits, it may only be a way of getting their hands on such funds from people. Moreover, investors must not be blinded by high interest rates as if a company turns out to be in a bad financial state, then not only will you lose your interest, but also your principal amount of investment.
Before you invest in company fixed deposits, ensure that they have been rated by authorized institutions like ICRA or CRISIL. In addition to this, observe the number of years the company has been in business, its performance over the years, its profitability and reputation, its Board of Directors and other vital information. Only when you are convinced of all such information, bank your investments in company fixed deposits.