Securing the highest possible interest rate on your fixed deposit can make a noticeable difference to your earnings, especially over longer periods. Even a small change in rates can impact your returns by thousands of rupees. Timing your investment, choosing the right bank, and understanding what affects rates give you a clear edge.
With simple yet smart decisions, you can lock in a rate that makes your money work harder without adding any risk. If you don’t take control now, you could miss better returns that others are already enjoying by making just a few better choices.
What is a Fixed Deposit (FD)
A fixed deposit (FD) is a financial product where you place a specific amount of money with a bank or financial institution for a fixed period at a pre-agreed interest rate. Once you invest, the interest rate remains unchanged throughout the term, regardless of market movements. This ensures stable and guaranteed returns, making FDs a reliable option for conservative investors.
You can choose the tenure based on your financial goals, ranging from a few days to several years. Interest can be paid monthly, quarterly, or at maturity, depending on the option you select. Senior citizens often receive slightly higher interest rates.
FDs come with flexible deposit amounts and are offered by banks, NBFCs, and small finance institutions. Some allow premature withdrawals, though this may reduce your interest earnings. Overall, an FD is a low-risk tool that helps you grow your money securely over time.
Why FD Interest Rates Matter
The interest rate on your fixed deposit directly affects how much you earn. A higher rate leads to better returns, especially when your money is invested for longer periods. Even a small difference—like 0.5%—can add up to thousands of extra rupees over time.
FD rates vary based on the bank, deposit tenure, and market conditions. If you don’t compare carefully, you might settle for a lower rate and miss out. For instance, gaining just ₹600 more per month on a ₹1 lakh FD could significantly increase your total earnings over the years.
Smart Strategies to Maximise FD Returns
Getting the best out of your fixed deposit means making simple, informed choices that boost your earnings without extra risk. Here are six practical ways to increase your FD returns:
Choose a Cumulative FD Plan
A cumulative FD pays out the interest along with the principal at maturity, which helps you earn more through compounding. This is ideal if you don’t need regular payouts.
Use the Laddering Method
Laddering means splitting your total amount across multiple FDs with different tenures. This helps you get better interest rates and manage reinvestment risks effectively.
Avoid Premature Withdrawals
Breaking your FD before maturity can lead to reduced interest and penalty charges. Always plan your liquidity needs before locking in your money.
Submit Form 15G or 15H if Eligible
If your annual income is not taxable, you can submit Form 15G—or Form 15H if you’re a senior citizen—to stop banks from deducting TDS. This allows you to receive the complete interest amount without any tax cuts.
Open FDs in the Name of Senior Citizens
Senior citizens earn higher interest—up to 0.75% more—than regular investors. Starting FDs in their name can help your family earn more safely.
Consider Small Finance Banks
Small finance banks often offer higher FD interest rates than larger banks. These are regulated by the RBI and can be a smart choice for better returns.
Factors That Affect FD Rates
Getting a higher interest rate on your fixed deposit depends on knowing what influences it. Here are the key factors that directly affect how much you can earn:
RBI Policy Rates
When the Reserve Bank of India raises repo rates, banks usually increase FD rates to stay competitive. Lower repo rates often lead to a drop in FD interest.
Type of Bank or Institution
Small finance banks and NBFCs usually offer higher rates than large public sector banks. Platforms like Bajaj Markets help you compare these options easily to find better returns.
Tenure of the Deposit
FD rates can vary based on how long you lock in your money. Mid- to long-term deposits often offer better rates than short-term ones.
Age of the Investor
Banks provide an additional interest rate—typically 0.25% to 0.75%—to senior citizens. This benefit applies to both cumulative and non-cumulative FDs.
Deposit Amount
Some banks offer special rates for large deposits, usually above ₹2 crore. These bulk deposits are treated separately from regular retail FDs.
Common Mistakes That Can Lower Your FD Returns
Even small oversights can lead to lower returns or avoidable losses. Here are the key mistakes you should stay away from:
Not checking rates across banks can make you miss out on higher returns from smaller or newer institutions
Ignoring FD terms may lead to penalties if you need to withdraw your money early
Reinvesting without checking current interest rates might lock your money at a lower return
Forgetting that FD interest is taxable can reduce your actual earnings if you don’t plan ahead
Not using tax-saving forms like 15G or 15H can lead to unnecessary TDS deductions on your interest
Conclusion
Securing the best FD interest rate requires informed decisions and timely action. By evaluating options carefully, avoiding common pitfalls, and choosing the right tenure, you can significantly enhance your returns. Bajaj Markets, a financial marketplace, enables you to compare fixed deposit offerings from multiple providers in one place, ensuring you make well-informed investment choices. Rather than settling for lower returns, take a proactive approach and allow your savings to grow efficiently with minimal risk.
