The interest rate is not the sole asset allocation criterion when investing in Fixed Deposits in India. Various other benefits are available for investors, such as Insurance and healthcare. Of course, there is a tax exemption if you hold the deposit for five years or more.

According to experts, a Fixed Deposit is not a new tool among the asset classes, but it proves to be a good investment option when the market becomes highly volatile. Bank FD is the most favoured option amongst investors with a low-risk appetite. In a volatile market, like we have been witnessing recently, they are a smart choice. There are other advantages beyond interest rates:

1. Overdraft facilities

A bank customer is eligible for an overdraft facility against the FD. This feature helps investors raise funds during a financial emergency. With a maximum tenure of 18 months, you can choose a duration that suits you best. The flexibility of terms allows you to plan your expenses and help avoid any unnecessary financial strain.

2. Insurance benefits

Nowadays, various banks offer value-added FDs, which offer investors free Insurance and healthcare benefits. The DICGC, a RBI subsidiary, insures Rs. 5 lakh deposits. It promotes financial inclusion by encouraging individuals from all walks of life to access secure and reliable banking services.

3. Income tax benefits

Indian banks offer Tax-Saving FDs that help investors claim tax exemption under Section 80C of the Income Tax Act, 1961. Investors can claim a deduction of a maximum of Rs. 1.5 lakh per year by investing in a Tax-Saving FD.

4. Assured returns

Bank Fixed Deposit returns do not fluctuate like many asset classes. It helps an investor develop a habit of investing at an early age. You can invest in it with a small amount for a smaller timeframe, like 15 days to three months. Thanks to the compounding frequency, you get assured returns that are higher than the investment amount.

5. Ease of handling

Nowadays, opening an FD does not require lengthy processes of visiting the bank branch and standing in queues for hours. In the Online Banking era, one can open or close the FD by spending a few minutes on the computer or on the mobile phone.

6. Emergency fund reserve

An emergency fund provides a safety net for unexpected expenses, including medical emergencies, car repairs, or sudden job loss. In times of need, you can break your FD prematurely by paying a minimal penalty to the bank, giving you quick access to your funds. Also, the bank offers higher FD interest rates for senior citizens, increasing their savings and assuring financial backup.

Conclusion

FD Investments during emergencies can help you create a smart financial strategy. They offer safety, guaranteed returns, and liquidity, and they let you access money without asking others for assistance.