India is one of the very few countries globally providing a wide assortment of investment options to investors. There are myriad options for investors, from fixed deposits to shares, mutual funds, bonds, sovereign saving schemes, unit-linked insurance plans, Post Office savings plans, and the like.
However, fixed deposits are the most popular of the various investment options available. Read on to know why fixed deposits or FDs have not lost their sheen despite multiple rewarding investment options present for investors in India.
5 Reasons Why Fixed Deposits Are a Popular Form of Investment in India
Here are the top-5 reasons that make a fixed deposit one of the best investment options for Indian investors:
High Returns
Fixed deposit interest rates have indeed tumbled a lot in the past few years. However, despite this, some fixed deposit schemes, such as PNB Housing fixed deposit scheme, have managed to offer higher-than-average interest rates to investors.
At this point, you may question how PNB Housing fixed deposit scheme provides higher returns than the industry average. The answer is simple.
Unlike conventional financial institutions, PNB Housing Finance focuses only on the booming housing and real estate sectors. Most of the loans they sanction are collateral-based and linked to the borrower's property. Hence, the chances of default or NPA (Non-Performing Asset) are minimal.
Since they are near certain about getting their money back from borrowers, they can offer much higher interest rates on the fixed deposit schemes.
PNB Housing FD interest rate depends on the investment term. So, the interest rate of a one-year FD is lower than the interest rate of a ten-year FD.
Also, the interest rate of the PNB Housing cumulative fixed deposit scheme is higher than the interest rate of a non-cumulative scheme. For example, while a ten-year cumulative FD scheme fetches you a yield-to-maturity of up to 9.40%, the interest rate of a non-cumulative FD can range between 5.60% and 6.85%.
Safe Income
Fixed deposits are an excellent investment tool to get decent returns year after year. Investors also invest in PNB Housing fixed deposit schemes to get a regular income at predefined intervals.
While a cumulative FD scheme is good for future financial planning, a non-cumulative FD account provides you with a fixed amount at periodic intervals. In this case, the period can be monthly, quarterly, half-yearly, or annually.
Fixed deposits are considered a safe investment option for two reasons. When you invest in a bank fixed deposit, an investment amount of up to INR 5 lakh is insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC), an arm of the Reserve Bank of India (RBI).
However, corporate FDs, such as PNB Housing fixed deposit schemes, are rated by credit rating agencies like Credit Rating Information Services of India Limited (CRISIL) and Credit Analysis & Research Ltd (CARE).
Any rating above CRISIL FAA+ or CARE AA is considered the benchmark for corporate fixed deposit schemes. An FD with CRISIL FAA+ or CARE AA rating carries minimal risks, and investors can invest safely to earn high returns.
Instant Credit
Many investors do not know that fixed deposits can help them during a financial emergency. For instance, when you invest in a PNB Housing fixed deposit scheme, you automatically become eligible to apply for a loan.
This type of loan is known as loan against fixed deposit. The interest rate of such loans is 2% higher than the prevailing PNB Housing FD interest rate.
PNB Housing offers a more convenient way to invest in a fixed deposit scheme. You can open the PNB Housing website, check the FD interest rate, and hit the 'Apply Now' tab to invest on the go.
The loan against FD facility offers relief from applying for a loan. Since you already have a fixed deposit certificate, that serves as the collateral for the loan. Also, the repayment term is aligned with the FD term, making it extremely convenient to repay the loan.
Excellent Liquidity
Unlike most sovereign saving schemes and mutual funds like ELSS (Equity-Linked Savings Scheme), PNB Housing fixed deposit scheme is 100% liquid. You can withdraw your money any time you need money. However, there might be a mandatory lock-in period of up to six months, depending on the kind of FD scheme you invest in.
To withdraw your money from an FD prematurely, you have to approach the financial institution with a written application. Alternatively, if you have invested online, you may place the withdrawal request online.
However, it is wise to know that you may have to pay a nominal fee (a.k.a. penalty) for closing an FD account prematurely.
Convenience
Nowadays, investors do not need to run to a financial institution to open a fixed deposit account.
The doorstep service facility ensures you do not have to move anywhere to open an FD account. PNB Housing sends a fixed deposit office to your registered address to collect and verify the documents and facilitate account opening.
So, investing in a fixed deposit scheme is easy when you know the best place to visit to open an account.
Conclusion
A fixed deposit is a bellwether financial instrument that leads all investments. So make PNB Housing fixed deposit scheme your gateway to a golden future and stop worrying about volatile returns.
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