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Mon, 30 Mar 2020

Northeast Today

How to choose the right fixed deposit?

How to choose the right fixed deposit?
December 30
19:08 2019

Fixed deposits are offered by both established banks and many deposit-taking non-banking financial corporations. Even from the same depositor, you would find that the FD interest rate offered varies based on the type of the fixed deposit and the tenure of the deposit. As such, it may seem a daunting task to choose the right fixed deposit to add to your investment portfolio. Here are a few tips to guide you to making the right choice:

  1. High interest rate

FD interest rate varies from one depositor to the other. They can range from as low as 6% per annum to over 8% per annum. Avoid depositors that offer under 7% per annum interest rate. With PNB Housing you can get FD interest rates as high as 8.45% per annum. It rises to 8.70% for senior citizens.

  1. The credibility of the lender

Fixed deposits are considered to be the safest investment option available to Indian investors. That said, the security of your deposit does vary with the financial health of the depositor you choose. Make sure that you opt for an FD that has at least an FAAA rating from CRISIL or an MAAA rating from ICRA. This indicates that the credit risk on the deposit is low.

  1. Cumulative vs non-cumulative deposit

Based on your investment goals, you can choose between cumulative and non-cumulative deposits. Refer to the table below for the differences between the two:

Cumulative FDNon-Cumulative FD
Interest is added back to the deposit and paid at maturityInterest paid out periodically
Interest is compounded annually on March 31Interest paid out monthly (last day of the month), quarterly (last day of the financial quarter), half-yearly (September 30 and March 31) or annually (March 31).
Can be used to build a corpusCan be used to earn a periodic income to meet daily expenses
Can be used as a tax-saving instrument under Section 80CCannot be used for tax saving purposes under Section 80C

4. Tax-saving FD
Tax-saving FDs are a special type of cumulative deposits that are exempt from tax under Section 80C. In case you have not used up all the limits available under the section, you should consider investing in a tax-saving fixed deposit. This type of FD has a lock-in period of five years, so ensure that your liquidity requirements can be met for the period before you opt for a tax saving FD. Typically, a loan facility is not available against this type of fixed deposits.


PNB Housing has among the simplest process to open a fixed deposit. Just visit their website and click on the “contact us for deposits” button. In the form that opens provide your contact details and the amount, you would like to deposit. A representative from PNB Housing would reach out to you to take the process forward. You can also submit the duly filled application form with proofs of age and address and the deposit amount at any of the PNB Housing branches or select PNB Housing collection centers listed here.


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