Bank FD is the most popular and convenient investment option for the common investor but do you know that there are some disadvantages of investing in FD. Let’s know what loss can happen to you by investing in FD.
Getting FD in a bank can be said to be the most popular investment option in India. In this, you get the facility to invest according to your choice in less money. This is the reason why bank Fixed Deposit (FD) remains the most popular investment option.
After May 2022, when RBI started increasing repo rates continuously, banks also increased FD rates a lot. The situation is that the FD which was giving about six percent return two years ago, is now getting interest above eight percent.
Despite being a great investment option, FDs have several limitations. It has many drawbacks. So before investing money in it you need to know what are the disadvantages. This is very important for you as an investor.
Returns are less
The first disadvantage of investing in Fixed Deposit is that it has a fixed rate of interest. That is, the interest that the bank has fixed for you, remains fixed. The interest you get in other investment options like stocks or mutual funds is much higher than this.
Premature withdrawal penalty
If you repay the FD before the stipulated period, then you will have to pay a penalty.
Does not get the benefit of market boom
One drawback of FDs is that you continue to get a fixed rate of interest till the end of the tenure of the scheme. You continue to get interest at that rate till the end. Even if the market moves up, your returns are assured. There is always scope for loss in this.
Lock-in-period
When you invest in FD, your money gets locked in for a specified period. Most of the fixed deposits are such that you cannot break them in the middle and if you break them in the middle then you have to pay a very heavy penalty.
You will not get your money until the tenure of the Fixed Deposit is over. Even if there is a lakh emergency, you will not have your own money when you need it.
Tax on interest
Whatever interest you get on FD, you have to pay tax on it. Whatever interest you get, you will have to pay tax on it.
Rupee value
Whatever you invest, the return on it should be more than the inflation rate. Bank fixed deposits generally do not meet this parameter. If FD does not provide inflation-beating returns, then there is no point in investing in it.
No capital gains benefit
No capital gains on FD earn profit. This harms you in the long run.
if the bank goes bankrupt
People generally consider FD as a safe investment, but that too is safe only until the bank is insolvent. If the bank itself collapses, there is no guarantee that your FD will be saved.
