Fixed deposits are a critical financial option supplied by banks to investors to preserve and create money. While the returns on FDs are not very appealing when inflation is taken in, they play a vital function in balancing one’s portfolio. Because of their convenient investment lengths and set return policy, which provide greater flexibility, many choose FDs.
Interest rates on FDs vary throughout banks. The amount and length of the investment can affect the returns. Notably, banks adjust FD rates following rate reductions by the Monetary Policy Committee of the Reserve Bank of India.
FDs are a simple addition to any portfolio because to their risk-free nature and secure returns.
For FD investments, you have a range of tenures and quantities to pick from. FDs are typically used for short-term financial objectives. FD investments with a duration ranging from one month to ten years are permitted by banks for as little as Rs 1,000.
According to calculations, FDs might not be able to outperform their more alluring, high-risk alternatives, such as stocks and mutual funds, over a five-year period. However, if you want safe returns, FDs can be a suitable option.
You can get the following returns if you deposit Rs 5 lakh in an FD for five years:
Duration: Five Years
The sum is Rs 5 lakh.
Rate of Interest: 6.75%
If you invested Rs 5 lakh today, May 18, you would earn Rs 1.98 lakh in interest on a five-year FD.
FY26 interest earned: Rs 30,335
Earned interest
FY26 interest earned: Rs 30,335
FY27 interest earned: Rs 36,715
FY28 interest earned: Rs 39,339
FY29 interest earned: Rs 41,889
FY30 interest earned: Rs 44,879
FY31 interest earned: Rs 5,593
This computation is predicated on the idea that interest being reinvested in the FD rather than being paid out on a regular basis by the bank. In this instance, the interest is added to the principal amount once every three months, or capitalized.
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