Recurring Deposit Interest Rates

1. Introduction

A fixed deposit [FD] is intended for those investors who want to make a lump sum for a fixed term, say for a minimum period of 15 days to five years and above, earning a higher interest rate in return . Investor receives a lump sum (principal + interest) at maturity of the deposit.

bank deposits at a fixed rate regime is one of the most common savings open to the average investor. The deposits also give a higher interest rate a bank savings account. Facilities vary from bank to bank. Some of the facilities offered by banks are overdraft (loan) facility on the amount deposited, premature withdrawal before maturity period (implying a loss of interest) etc. Bank deposits are safe enough because banks are subject control of the Reserve Bank of India.

With increased investment avenues in the day it is easy to forget that until the reform era began in 1991, the Indians had little means to invest their savings. While we have not seen any development on the lines of most developed economies, there are a number of instruments that were unheard of today in the midst of lay investors, just over a decade, he recently. On the one hand, investors are still struggling to come to terms with the complex nature of certain securities and other intermediaries seek to educate investors. Stock favorites such as the DF are meanwhile enjoying a new surge in popularity.

It is noted that in recent years because of soaring stock markets and lower interest rates for time deposits, time deposits have been arrested for deposits supportive and very few people wanted to invest in the fixed deposit. In addition, the government savings plans, particularly the post office saving schemes, had an advantage over SDS.

But the recent accidents on the stock markets and rising interest rates, FD became the flavor of the month.

However, recent changes have again brought investment in DF in the spotlight. Contributing factors include the decision to grant tax relief in terms of coverage under section 80C of the Income Tax Act. Another important factor was the gradual increase of interest rates on the SDS. The increase in interest rates is mainly due to rampant inflation of 12%. Regulatory measures to fight against inflation have done something good for depositors fixed at least in the short term. It was heard on the government and the Reserve Bank of India (RBI) as part of growth must be sacrificed, the demand in the economy must be reduced and drawdowns of the banking sector must be significantly lowered by 25-26 drawdown cent the growth of last year to save the economy, which is looking fragile due to inflation. Struggling against the war on inflation has forced RBI to tighten liquidity in the banking system and to the availability of credit is difficult for the market. Banks have responded to the RBI's action positively and now, these measures seem to have pushed India into the regime of high interest. All banks in the country are announcing increases in interest rates and bring strong competition among banks to see who can eat the bigger pie of the bond set in the country.

The collapse of capital markets and large amounts of losses by investors in IPOs are a couple of factors that hunting safety by investors, even at the cost of lower yields. The central bank, RBI and market regulator SEBI, have tried to curb unscrupulous operators to be reimbursed on this rush to SDS. In fact, between 1994 and 1996, a few states like Tamil Nadu has witnessed a veritable explosion of FD offer with promises of returns impossible, as 36 percent even 50 percent per year in some cases. A number of Investo gullible.