Bank vs non-bank FD investment: Evaluating the pros and cons

In the bustling city of Mumbai, Priya had always been cautious with her finances. Seeing her parents struggle during economic downturns, she vowed to make smarter investment choices. One day, on her way to the office, Priya noticed an IDFC FIRST Bank hoarding with the tagline “Always You First”. The phrase resonated, prompting her to explore the bank’s fixed deposit (FD) investments.

Discussing the topic with friends and family, Priya learned about other FD investment options, such as NBFCs and corporate FDs. This confused her as she contemplated whether to invest her hard-earned savings in a traditional bank or explore these alternative FD options.

In her quest for financial security, Priya sought clarity on the distinctions between bank FDs and non-bank FD options like NBFCs and corporate FDs.

Bank FD vs non-bank FD investment: Definitions and features explained
 

Bank FDs are financial instruments banks offer, allowing you to deposit a lump sum for a fixed tenure at a predetermined interest rate.

An FD investment has several key characteristics that make it a popular choice among investors. They are listed as follows -

1. Safety -

Insured up to ₹5 lakhs by the Deposit Insurance and Credit Guarantee Corporation (DICGC) on your principal as well as interest, ensuring high security.

2. Interest rates -

It ranges from 3% to 7.50%, depending on the bank and tenure.

3. Tenure -

Flexible options available from 7 days to 10 years, accommodating various investment goals.

4. Liquidity -

Allows for premature withdrawal with potential penalties, offering some access to funds.

5. Reputation -

Backed by established financial institutions, providing reliability and trustworthiness.

Non-bank FDs
 

Non-bank FD investments are offered by Non-Banking Financial Companies (NBFCs) and corporations, allowing individuals to invest for a fixed term at competitive interest rates. The following features characterise them -

• Risk -

Not insured like bank deposits, leading to a higher risk factor, especially with lesser-known entities.

• Tenure -

Similar to banks, tenures usually range from 1 to 10 years, though some may offer longer durations.

• Liquidity -

Often have stricter withdrawal policies, making it less convenient to access funds in emergencies.

With numerous FD options available today, it’s easy to feel overwhelmed. The best approach is to diversify and balance your FD investment. Ensure guaranteed returns on your hard-earned money with an IDFC FIRST Bank FD. Open an FD online instantly and enjoy attractive interest rates!

Bank FD vs non-bank FD investment: A detailed comparison
 

To secure stable returns with minimal risk, learning how to invest in FD is essential to understanding the differences between bank and non-bank FD investments. Here is a compilation of the general differences between the two FD options -

Why bank FD investment might be the best choice for you
 

Bank FDs are a popular investment option for those seeking safety and reliability. Here are key reasons why they might be the best choice for you -

• Safety and security -

Bank FDs are insured up to ₹5 lakhs by the DICGC, a subsidiary of the RBI, thus providing a safety net for your FD investments. This makes them one of the safest options available.

• Guaranteed returns -

Unlike stocks or mutual funds, which can be volatile, bank FDs offer a fixed interest rate. This ensures that your capital is preserved while earning a predictable return.

• Flexible tenures -

With tenures ranging from as short as 7 days to up to 10 years, bank FDs allow you to choose an investment duration that aligns with your financial goals and liquidity needs.

• Tax benefits -

Banks offer tax-saving FDs with a fixed tenure of 5 years. With these FDs, you can claim tax benefits under Section 80C of the Income Tax Act, 1961, up to a maximum of ₹1.5 lakh.

• Ease of management -

Opening and managing a bank FD is straightforward. Most banks offer online services, making it convenient to monitor your FD investment.

For those prioritising capital protection and steady returns, bank fixed deposits are a smart investment choice. They ensure peace of mind while growing savings.

Grow your wealth: Start an FD investment with IDFC FIRST Bank today!
 

Opening an FD with IDFC FIRST Bank is a smart way to grow your savings while enjoying peace of mind. Enjoy the following benefits with an IDFC FIRST Bank FD Account -

• Safe and risk-free -

The FD interest rate is unaffected by market volatility, ensuring that your FD investment remains secure and predictable.

• No penalty for senior citizens -

Senior citizens can withdraw early without penalties.

• Competitive interest rates -

IDFC FIRST Bank offers some of the best FD rates in the market, helping you grow your wealth and work towards financial freedom.

• Flexible interest payout options -

Choose between monthly or quarterly interest payouts, or opt for quarterly compounding. You can decide whether to receive smaller amounts monthly or a larger sum every three months.

• Higher interest for senior citizens -

Senior citizens enjoy an additional 0.5% interest on their FDs.

• Attractive returns -

Earn up to 7.50% per annum on your idle funds.

• Overdraft facility -

You can avail yourself of up 90% overdraft against specific FD for emergency needs.

• Premature withdrawal -

You can withdraw funds from your FD either partially or fully at any time

Conclusion
 

With competitive interest rates and flexible tenures, you can easily customise your FD investment to align with your financial goals. The process is simple and convenient, allowing you to set up your FD online in just a few clicks. Scan the QR code and start your FD instantly.