Why Is An FD An Obsession Amongst People?

Money is an asset which takes minutes to spend, but years to earn. It is vital to value every penny earned and spend it wisely. Moreover, saving is as significant as investing in different resources and earning interest until the end of the investment tenure. All individuals have different opinions and tools for investment and use them differently. After all, not all the needs are uniform amongst them.

In India, over a quarter of the households prefer fixed deposit over any other investment. Current day investment instruments are useful, but these deposits are widespread since ages. Many individuals invest their capital and funds in different areas to earn interest and higher returns. Real estate and gold are the preferred investments after this tool and help Indians save while investing.

In recent times, every banker would get around two to three FD applications every day against a single application for a mutual fund using a digital banking app. Following are the reasons why they are still a popular investment option in India:

• The availability of credit upon deposit:

While investing in these resources, customers also get the flexibility to take credit on them. Credit instruments such as credit cards, overdrafts, and loans against these deposits, are some of the products that banks offer nowadays. Credit card loans consist of 85 per cent to 100 per cent of the amount, whereas the overdraft facility provides loan higher than that.

• Easy entry and exit facilities:

Ideally, it takes only a day to open a deposit account and retrieve it at the time of maturity or even pre-maturity (upon request). These days with mobile banking, the pre-closure of deposits has become nearly instant. But in the case of mutual funds, it takes nearly two days to get the allotment and the amount credited in the bank account at the time of redemption. Mutual funds charge an exit load, which is not the case with a bank fixed deposit. Thus, they are a much preferable option over mutual funds in case of an emergency.

• Security:

In India, many families belonging to different income sectors of the society, look for assurance more than capital appreciation. With the launch of so many smartphones, banks have increased security with the help of the digital banking app. The application for all banking services is kept confidential, and people prefer these deposits despite low returns. They believe equity and mutual funds have high degrees of risk as compared to this investment option.

• The traditional method of financial planning:

India was an impoverished nation once upon a time. People considered taking into account income, expenses, net income, and savings for financial planning. They used to save the leftover money after covering expenses in jewellery and fixed deposits. Bank deposits are easy to understand, operate and access. Hence, many new investors will automatically refer to the fixed deposit interest rate as they are a traditional investment and saving tool.

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shashankbhaskar Joined: July 26th, 2019