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A Quick Guide in Choosing the Best Fixed Deposit Scheme with a High-Interest Rate

A fixed deposit or FD scheme is one of the oldest, most reliable investment schemes offered by banks and financial institutions. It has survived despite the booming popularity of stocks, offering returns comparable to mutual funds without any of the associated risks. FDs offer maximum financial security.

With such a propensity for returns, you must understand how FDs work. You begin with depositing, i.e. investing a principal amount. The permanent FD interest rate then helps this amount grow over the tenure of your FD. Due to the large role interest rates play, looking for FDs with the highest interest rates is always good.  

What factors determine the Best Fixed Deposit Scheme?

The following factors help in determining the best FD scheme:

  • Interest

Interest rates depend on tenure and the investor’s age, with lump-sum deposits usually attracting the higher rates. Meanwhile, categories like senior citizens can get an interest rate of 0.5% higher than usual. This rate remains constant over the investment’s tenure, regardless of market fluctuations, further guaranteeing a certain amount of returns. 

  • The Bank’s Credibility

Checking the bank or NBFC’s credit rating is another good measure to take before opening an FD. Since different institutions have different schemes, creating multiple FDs helps you maximize benefits. Simultaneously, you also avoid the mistake of putting all your eggs in one basket (or, in this case, a bank). 

  • Premature Withdrawal

Most institutions require you to pay the penalty if you want to liquidate your FD before maturity. However, this penalty is usually as low as 1%. Choosing the lowest premature withdrawal penalty promises a better FD scheme experience since you still leave with 99% of your returns intact. You should also note any additional criteria your bank mentions for you to be eligible for premature withdrawal, ensuring you meet this for a smooth transaction. 

  • Loan

Many FD schemes provide loan facilities to the investors, i.e. putting up your FD as collateral to avail of loans. These are secured loans having longer tenures up to the FD’s tenure and lower interest rates. This makes repayment much more manageable, while you can get a loan of up to 90% of your FD’s value. This facility is desirable for many investors, especially if they get into a financial fix with no access to their FD. 

  • Cumulative vs Non-Cumulative

Choosing the ideal type of FD for your needs is also essential. A cumulative FD allows you to reinvest the amount after maturity, earning you a higher income with the highest FD interest rates that compound over the FD’s term. If you need returns at specific intervals, i.e. monthly or annually, you can choose the non-cumulative option and get a steady income stream. 


You can make the most of your investment by selecting an FD scheme best suited to your needs. However, make sure that your investment plan aligns with your investment goals to be financially secure in all spheres of life. Read the above points thoroughly and make informed decisions.



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