Should we boycott FDs just coz they give lower interest rate?
Absolutely not.
For goals which are less than 1-2 years away FDs are still the best investment option.
I'm talking about saving for Iceland vacation, iPhone 14, new car etc.
They are even able to beat most short-term debt funds because before 3 years the tax treatment is the same for both.
I'm not talking about FDs from nationalised bank such as HDFC, ICICI, Canara bank, SBI etc which give 4% to 5% FD returns which they publicise like the cure to cancer.
I'm talking about FD from Small Finance banks which give 6% to 7% returns and often not talked about.
The only catch is that these banks are comparatively riskier, since they lend to small business and farmers.
But there is a hack !!
If you invest less than 5 lakhs in a Small Finance Bank, then RBI has got your back since they insure it.
This 5 lakhs is inclusive of interest earned, so I would say don't invest more than 4 lakhs in a Small Finance bank FD.M, if you have more than one multiple accounts in other people's name or in a different bank all together.
➡️ Bottom line: For your next iPhone you can consider investing in a Small Finance bank FD.
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