The Ministry of Finance has kept the interest rate on small savings schemes constant for the quarter between January and March 2021. Post office FD will then be the best choice for those investors who intend to invest in a fixed deposit plan since it offers 6.7 per cent for a maturity period of 5 years. If we contrast the State Bank of India (SBI), the FD interest rate of HDFC Bank and the FD interest rate of ICICI Bank with the FD interest rate of the post office for the same duration, investors will be able to gain around 1.4% higher interest.
In comparison, financial analysts are of the opinion that investors’ money is better in the post office FD. SBI gives a 5.3 per cent return on FD for 5 years relative to the FD interest rate provided by the post office, while the HDFC Bank FD interest rate is also 5.3 per cent for the same duration, whereas the ICICI Bank pays 5.35 per cent on FD deposits for 5 years. Investment specialists, however, are of the impression that post office Bank FD is 100% secure, whereas in the case of bank FD, only up to Rs 5 lakh of investor money is secured. In the event of a liquidity crisis, money over Rs 5 lakh will be impaired.
In the event of bank deposits, one’s capital is insured up to Rs 5 lakh. In the event of bank bankruptcy, though, the depositor will have to forfeit cash above Rs 5 lakh. From the safety perspective, post office FD is safer than bank FD, but as their facility is much better than the post office, people favour bank FD. Fixed deposits for a term of three to five years are very traditional for small investors. The safety of the capital is a significant consideration for such investors and, at the same time, they often get around 1.4 per cent higher annual returns. Thus, it is preferable for such investors to decide post office FD against bank fixed deposits.