How to Earn More than 9.50% on Bank Fixed Deposits? Facts that You Might Not Be Aware of
By Anupama Deshpande | Oct 24, 2018

Whenever you are having surplus money which you want to place in safe hands with relatively higher returns then you search for some fixed rate instrument. Investing in banks' fixed deposit is one of such types of instruments where you can park your money & add wing to it.

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Bank's Fixed Deposit (FD) is one of the simplest and most popular investment avenues in India. Bank FD is a secure investment avenue where you can deposit you fund and can earn a guaranteed interest on it. It is also known as Term Deposit. In an FD, you get a fixed rate of interest which is based on the tenure of deposit of funds.

After the RBI has started increasing its key policy rates, banks have also started hiking their FD rates to follow suit and to pass on maximum benefits to their customers.

Bank FD is a very good investment opportunity particularly for senior citizens due to following three reasons:

1. Banks offer more interest rate to the senior citizens
2. Senior citizen avoid to invest in risky instruments so they prefer bank FD
3. To take advantage of current rising interest rate regime

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As soon as your money is deposited in FD with the bank for a specific tenure ranging from 7 days to 10 years, it starts earning an interest based on the selected tenure and can go to rates as high as 9.50% p.a. The rate of interest depends on the tenure as well as the bank.

It is to be noted that fixed deposit of only up to Rs 1 lakh in any bank is protected under the Deposit Insurance & Credit Guarantee Scheme of India and the rest of the amount is not protected.

You can open an FD account in any of following 3 ways:

• Through Internet Banking
• Through Phone Banking
• Depositing through a cheque or a demand draft with the bank

Given below are top 5 banks offering maximum rate of interest on fixed deposit:

Now from above table, it is evident that you can earn 9.50% from bank FD but the question is as to how to earn more than 9.50% on bank fixed deposits? Facts that you might not be aware of are mentioned below:

In order to earn more than 9.50%, you need to reinvest your interest income instead of withdrawing it. If you reinvest the interest earned on your FD then the interest will be higher in the coming years as the interest got reinvested and not withdrawn.

We can understand the same with an example. Suppose you have invested Rs 1 lakh in an FD at 9.50% p.a. for 3 years. Then you will earn Rs 9,500 p.a. as an interest which you can withdraw every year for 3 years. So the total of Rs 28,500 will be received as an interest in 3 years by you.

In case you reinvest this amount instead of withdrawing it then you will receive an interest of Rs 32,827 at the end of third year as total interest in place of Rs 28,500 which is quite more than 9.50%.

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