Given that FD rates are high, is it a good time to book a 10-year FD? 

5 MinsJan 04, 2023

Fixed deposits, or FDs, are a popular investment instrument in India. They are safe, convenient and liquid. In a country where approximately 75% of the population belongs to the lower or middle-class segment, FDs are the most trusted investment option. They have minimal investment amount, making them popular. 

Given that FD rates are high, is it a good time to book a 10-year FD?

During the Covid-19 pandemic, interest rates on deposits were fluctuating, witnessing a mostly downhill trend. Since then, things have changed. Since inflation has gone up, banks have revised interest rates on deposits. With long-term FD, the interest rates on deposits are now higher than before.

Advantages of investing in long-term FDs:

Following the rate hikes, FDs have become an attractive investment option. Banks are offering between 6% to 7% interest on FDs. Axis Bank offers up to 7% interest on FDs. In light of this, long-term FD investment may be a good option to meet many of your financial objectives.

  • Liquidity
    Although it is common that fixed deposits make it simple to access money, not all have high liquidity. With Axis Bank, you can quickly liquidate your FD in the comfort of your home in just a few clicks.
  • Suitable for long-term financial goals
    Long-term deposits are sustainable when achieving financial objectives that call for a reasonable duration of roughly 5–10 years. For instance, your goal could be for a wedding, a business, or the schooling of your children. One can strategically park their money to take advantage of compounding and high interest over the long term.
  • Earn assured returns
    A fixed deposit earns you more interest than a typical savings account when you deposit money into one of them. An FD promotes saving and ensures returns with lots of interest. Long-term investment in an FD is one of the finest strategies to get better profits in the future.
    There is a very little chance of losing your corpus, guaranteed interest, and principal amount, which you can take advantage of at maturity. The returns offered on fixed deposits also assist you in getting a good return on your investment because there are no other costs associated with investing other than the minor bank charges.
  • Helpful in availing overdraft facility
    A long-term FD can help you borrow money through overdraft services in exchange for these long-term FDs. You can also use a deposit as collateral when applying for a credit card.

[Also Read: New to investing? Here’s why you should look at bank FDs ]

Should you invest in an FD for 10 years?

Given the liquidity scenario in the market, banks may further increase the interest rate on FDs. However, you should note that inflation projections are currently at 6.7%. If a bank is not offering at least that much interest rate on deposits, it may not be a good idea to invest. For instance, Axis Bank provides 7% interest on 10-year FDs to senior citizens offering inflation-beating returns. In such a scenario, it may be in your favour to invest in FDs, especially if you are risk-averse.

However, if you have a higher risk appetite, investing in debt mutual funds may be a better alternative. Since you are investing in the long-term, you can also consider equity mutual funds.

For individuals who are the risk-averse sort of investors but still want to earn a decent return on their hard-earned money on the investment, Fixed Deposits, in general, and long-term FDs, in particular, can be a good option.

However, if your investment goals and risk appetite are different, you can consider other forms of investment. Long-term FDs can be a good investment option for senior citizens because of their security, liquidity and overdraft facilities.

Visit Axis Bank Mobile Application and try the FD Calculator to know your return on investment. Start a long-term FD with Axis Bank and rest assured, get a good return on investment and easy withdrawal. Contact us or check out on Axis Bank Application to know more and invest in long-term fixed deposits.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.