PPF vs FD: Which Is Better In COVID?

Two of the most secure investment options available to the Indian investors are fixed deposits and Public Provident Funds. They are ideal for risk-averse individuals. But which one to opt for during crisis like COVID? Let us understand these concepts in detail.

Overview of FD:

A fixed deposit, also called a term deposit, is an investment tool that allows consumers to safely park their hard-earned funds and earn interest on the same. The interest earned on FDs is always higher than the savings account. As the name says, the interest rate, as well as the deposit amount, remains fixed throughout the tenure. All banks, be it commercial as well as small financial companies along with NBFCs, offer FD accounts.

Eligible for FD account:

If you are not seeking any risk, then a fixed deposit can be quite promising. The returns get calculated at pre-fixed interest rates and a change in the market situation does not hamper the interests of the current consumers. Where the market is so unstable and shaky during COVID, if you do not want to risk it all, you might want to consider investing in an FD or bank account.

Therefore, considering the ongoing scenario, we advise you to invest the funds in a bank this is because bank FD carries up to INR 5 lakh of deposit insurance while company FD is lighter comparatively. FD investments also offer tax benefits where you can save up to INR 1.5 lakh annually.

Overview of PPF:

This is an investment as well as a tax-saving instrument backed by the Indian Government. The scheme was introduced by the Finance Ministry more than 50 years ago and is still in demand amongst the investors who like to keep away from market-linked risks. Since the Government guarantees PPF, it is all secure. Although this is a product by the Indian Government, some of the top banks provide PPF schemes as their product. The interest rates for PPF differ and give higher returns when compared to PPF rates from India Post.

Eligible for PPF:

If you do not have a significant amount to invest in and are a risk-averse investor with decent returns, then PPF works well. However, unlike an FD, PPF comes with a 15-year lock-in term. Hence, if you are alright to keep a portion of your savings locked for 15 years, then PPF is a good scheme.

Amidst the ongoing COVID situation, it is better to keep some cash handy. Therefore, it may not be ideal to invest in PPF right now and instead wait for a few months. Weigh the preferences and invest later when the situation stabilises.

If you want to know maturity amount beforehand, there are tools like FD calculator and PPF calculator available on the bank’s website. These are free of cost and used multiple times for aiding investors in deciding the best option between FD and PPF.  

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Rajesh K Das Joined: July 29th, 2020