4 best bank deposit schemes for retail investors

As a retail investor, you can invest in a risk free deposit scheme of a bank or post office for better return. In India, we have different type of bank deposit schemes to invest. As a retail investor you can choose any private or public sector banks to invest your hard earned money in a secured way.

Today, in this article, we will discuss 4 best bank deposit schemes or risk free investment options for a resident Indian retail investor.

Public Provident Fund Scheme – A long term investment plan

Public provident fund scheme or PPF is a long-term risk free deposit scheme in India. Investment in PPF not only gives higher interest rate but is also a tax free scheme.

In PPF, you are required to invest for 15 years to get a lump sum amount at the end of maturity. After maturity you will have option to extent the investment tenure to another 5 years term.

Attractive features of PPF:-

  • Withdrawal and loan facility can be availed by investor.
  • Higher tax free per year interest rate of 8.6%.
  • PPF account can be opened in the name of minor as a guardian.
  • Investment into PPF is eligible for tax deduction under section 80C for a maximum amount of up to 1,50,000 rupees.

Recurring deposit – A Periodic bank deposit scheme

Recurring deposit is the best monthly deposit scheme where you invest periodically for a certain number of periods to get paid at the end of the term.

You can open a RD account in a bank or post office. In banks you will have flexibility of account transfer.

You can ask your bank to deduct the stipulated amount from your savings or current account every month.

Attractive features of Recurring Deposit schemes;

  • You can start with a minimum amount of Rs. 500 per month for minimum period of 6 months up to a maximum tenure of 10 years.
  • You can also apply for a joint recurring deposit account.
  • Interest rates are the same as bank’s fixed deposit scheme
  • TDS not deducted from interest on recurring deposit. However, interest income is taxable under the head income from other sources. You need to disclose it while filing your income tax return.
  • Premature withdrawal allowed but interest on recurring deposit scheme will be lower than the base rate and penal interest can be levied.
  • Loan or overdraft up to 90% of the balance in recurring deposit account is allowed.

Term Deposit or Fixed Deposit Scheme

Term deposit which is also known as fixed bank deposit scheme, is one of the favourite investment options in our country.

You invest a lump sum amount for a fixed tenure at predefined fixed interest rates in a bank where you have opened your fixed deposit account.

Attractive features of bank fixed deposit scheme:

  • Get fixed interest rate for a predefined period on your investment.
  • Secured and risk free.
  • Eligible for tax deduction under section 80C up to a maximum amount of Rs. 1,50,000 if you have invested for 5 years. TDS is deductible on interest on fixed deposits irrespective of the tenure of investment.

Saving account – Regular small bank deposit scheme

Bank saving account is a must for every Indian to keep their emergency fund in a safe place. In return of investing in saving account, you will get good return with all those facility that one normally require to have.

With the increase in competition, now you can open saving account with attractive interest rate with a private bank such as Kotak Mahindra Bank and Indusind bank.

Attractive features of bank saving account;

  • Money can be withdrawn at any moment as required by investor
  • Account can be used as a sweep in account for term deposits to get interest at a higher rate which is close to fixed deposit interest rate.
  • Better option than keeping cash in hand

If you are a non resident Indian then banks are offering various investment options or deposit schemes specifically designed for NRIs to keep your money safe back at home.

You can open various NRI saving account and/or fixed deposit schemes to get good return on your investments.

is a fellow member of the Institute of Chartered Accountants of India. He lives in Bhubaneswar, India. He writes about personal finance, income tax, goods and services tax (GST), company law and other topics on finance. Follow him on facebook or instagram or twitter.