Whenever an individual wants to make a safe investment, the first instrument he thinks about is a fixed deposit and maybe it’s a bank fixed deposit. There are other financial institutions also that provide FD facility and depositors can earn higher interest rates comparatively. Today you will get to know bank FDs, company FDs, and Post Office FDs (term deposits).
Currently, Company FDs are offering a higher rate of interest than the post office and bank FDs. However, there are various factors that affect applicable interest rates on an FDs. Following are the comparison for these FDs rates:
Interest Rate Rules and Regulations
When you open a fixed deposit account with a bank, the offers interest rates as per RBI rules and regulations whereas when you open a fixed deposit account with Non-banking Financial Companies (NBFCs), it’s a company FD which is governed by the Companies Act, unlike bank FDs. Post offices offer term deposits also known as post office FDs and interest rates are framed by the Central Government. These term deposits are specific about FD tenor i.e. 1 year, 2 years, 3 years, and 4 years.
- At present, post office FD interest rates are as follows:
- 1-3 years 5.5%
- 5 years -6.7%
- Bank FD rates are in the range of 4-6% and NBFCs FD rates like Bajaj Finance FDs are up to 6.85%. Applicable interest rates are depending upon the customer’s category, FD tenor, and investment amount.
Interest Rate Privileges
It is quite attractive if a financier offers benefits over regular interest rates. For instance, Bajaj Finance offers an additional interest rate if you open an online FD account or if you renew your FD. On the other hand, with post offices, FD interest rates are fixed for different tenors and there are no such interest rate benefits. Interest on senior citizen saving scheme with every financial institution is higher than regular FDs.
Interest rates and interest payouts
Interest on post office term deposits is calculated quarterly and is payable annually. Whereas interest on bank FDs and company FDs is payable as per depositor’s choice. Depositors can opt for monthly/quarterly/half-yearly/annually as per his requirement. That is why most individuals who are dependents on their investments to meet their living expenses choose company FDs such as Bajaj Finance FD because they can earn higher interest at regular intervals.
Interest Rates on premature withdrawal
As you know, fixed deposits offer guaranteed interest over a fixed period to be paid at the maturity date. In case, you need your funds before the maturity date and you want to withdraw your funds prematurely, you will be penalized and your FD interest rates will be declined.
- First of all, in the case of a post office term deposit, you cannot withdraw funds before six months from the opening date of the account.
- Secondly, if you close the post office TD account before 1 year, only the Savings Account interest rate would be applicable.
- And in the case of a 2/3/5 year deposit, if you withdraw funds after 1 year, interest will be declined by 2% TD interest rate. You will receive at this reduced rate for the completed years, and for the incompleted year at PO Savings Interest rates.
- Whereas penalties on premature withdrawals with different banks and NBFCs will vary. They all have their own regulations regarding FDs which are available on their official websites. With Bajaj Finance FD, you can go for premature withdrawal of FD after a minimum lock-in period of 3 months.
Here you have seen the differences in interest rate calculations with different financial institutions. If you are looking for higher interest rates and interest rate privileges, opt for company FDs such as Bajaj Finance FD. Always go for company/corporate fixed deposits with FAAA ratings by CRISIL and MAAA by ICRA, as in the case of Bajaj Finance FD. These credit ratings ensure the safety of your deposits.