A bank fixed deposit (FD) is one of the most popular investment options due to the safety it provides to its investors with assured returns. In the wake of financial crisis last year, banks had been consistently increasing FD rates to lure customers who were being more cautious regarding their investments.
With signs of economic recovery, banks have again resorted to slashing FD rates to lower their cost of funds. Banks are now concentrating more on low cost deposits. Two leading public sector banks, SBI and PNB, have already trimmed their FD rates by 0.25 percent to -0.5 percent across certain maturities. Dhanalakshmi bank has also reduced its FD rates by 0.25 percent to 1 percent.
Amidst declining FD rates, a risk-averse investor can consider various other safe options like:
Monthly income plans (MIPs)Post offices offer monthly income plans (MIPs) which are similar to fixed deposits. As the name suggests, these ensure a regular cash flow because of the fixed rate of 8 percent. Unlike FDs that have various maturities, a post office MIP carries tenure of six years. The minimum deposit amount is Rs. 1,000 and the maximum deposit amount is Rs three lakh in case of a single account and Rs. 6 lakh in case of a joint account. Besides this, a bonus of 10 percent of the deposited amount is paid at the time of repayment on maturity.