Monthly FD Interest Rates: Your Comprehensive Guide

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Fixed deposits (FDs) are a popular investment option, offering assured returns over a fixed tenor. While FDs traditionally pay interest on maturity or at periodic intervals like quarterly or annually, some issuers also provide the option to earn interest payouts every month. This monthly interest payout feature can be beneficial for individuals who rely on FD earnings as a regular income source, such as retirees.

Understanding Monthly FD Interest Rates 

When you open a fixed deposit account with a bank or NBFC, you agree to invest a lump sum amount for a predetermined period, known as the tenor. In return, the issuer pays you interest on your deposit at periodic intervals, which can be monthly, quarterly, half-yearly, or annually, or as a lump sum at maturity.

The interest rate offered on FDs varies across banks/NBFCs and depends on factors such as the deposit amount, tenor, and their lending rates. Generally, higher deposit amounts and longer tenors fetch higher interest rates. Issuers also review and revise their FD interest rates periodically, influenced by the Reserve Bank of India’s (RBI) repo rate and other economic factors.

Opting for monthly interest payouts can be advantageous for those who rely on their FD interest as a regular source of income, as it provides a consistent cash flow. However, it’s important to note that monthly interest rates may be slightly lower than the rates offered for quarterly or annual payouts, as the bank has to account for the administrative costs of more frequent interest calculations and payments.

Comparing FD Interest Rates 

To ensure you get the best returns on your monthly FD investment, it’s crucial to compare the interest rates offered by different issuers. Here’s how you can stay informed about the prevailing bank/NBFC FD interest rates:

  1. Check the official websites: Most issuers provide detailed information about their FD interest rates on their official websites, including the rates for different tenors and payout frequencies.

  2. Visit branches: You can also visit your nearest branch and inquire about the latest FD interest rates and available schemes

  3. Use online calculators: Many issuers offer online FD calculators that allow you to input your desired deposit amount, tenor, and payout frequency to calculate the potential returns.

Utilising the Bajaj Finance FD Calculator 

Bajaj Finance, a reputable non-banking finance company, offers competitive interest rates on fixed deposits, along with the option to earn monthly interest payouts. You can use their FD calculator to estimate your potential monthly earnings before investing.

The Bajaj Finance FD calculator is a user-friendly online tool that allows you to input your desired deposit amount, tenor, and interest payout frequency. It then calculates and displays the interest you can earn, along with the maturity amount.

Here’s how you can use the Bajaj Finance FD calculator:

  1. Visit the Bajaj Finserv website and navigate to the FD calculator page

  2. Select the customer type and enter the deposit amount you wish to invest

  3. Select the tenor for your FD (in days, months, or years)

  4. Choose the interest payout frequency as “Monthly’

  5. The calculator will instantly display the interest rate applicable to your chosen parameters, along with the projected monthly interest earnings and the maturity amount

This tool can be handy for comparing interest rates across various tenors and deposit amounts, allowing you to make enhanced decisions before investing.

Factors Influencing Monthly FD Interest Rates 

Several factors can influence the interest rates offered by banks and NBFCs on monthly FD payouts. Understanding these factors can help you make more informed investment decisions:

  1. Repo Rate: The repo rate, set by the RBI, is a key factor that directly impacts FD interest rates. When the repo rate increases, banks typically raise their lending and deposit rates, including those for monthly FD payouts.

  2. Inflation: Issuers aim to offer interest rates that outpace inflation to protect the real value of investors’ returns. If inflation rises, issuers may increase FD interest rates, including those for monthly payouts.

  3. Credit Demand: During periods of high credit demand, banks and NBFCs may raise FD interest rates to attract more deposits and fund their lending activities

  4. Liquidity Conditions: Tight liquidity in the banking system can prompt issuers to increase FD interest rates, including those for monthly payouts, to encourage more deposits and shore up their cash reserves.

  5. Competition: Banks and NBFCs may adjust their FD interest rates, including those for monthly payouts, to remain competitive and attract more depositors

Benefits of Earning Monthly Interest on FDs 

Earning monthly interest on fixed deposits offers several advantages, such as:

  1. Regular Income Stream: Monthly payouts can serve as a reliable source of income, particularly for retirees or those with limited earning avenues

  2. Financial Discipline: Receiving interest earnings monthly can help cultivate financial discipline by encouraging you to budget and manage your expenses more effectively

  3. Reinvestment Opportunities: You can choose to reinvest your monthly interest earnings into other investment instruments, further compounding your returns

  4. Tax Benefits: Interest earned on FDs is subject to tax deducted at source (TDS). However, if your total income falls below the taxable limit, you may be eligible for a refund of the TDS deducted

While earning monthly interest on FDs can be advantageous, it’s important to note that breaking an FD before maturity may attract penalties or lower interest rates. Therefore, it’s advisable to invest in FDs only if you have surplus funds that you don’t need immediate access to.

In conclusion, earning monthly interest on fixed deposits can be a smart choice for individuals seeking a regular income stream. By researching and comparing NBFC/bank FD interest rates, using tools like the Bajaj Finance FD calculator, and considering your financial goals, you can make an informed decision. With this, you can maximise your returns from your fixed deposit investments.

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Written by Richa Jain

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