Short Term Investment
Short Term Investment
Short Term Investment
• Recurring Deposits
• Recurring deposit
The Recurring deposit account is an account in the bank or in a Post
office where a depositor deposits a preset amount of money every
month for a fixed time period (generally ranging from one year to five
years). This format is meant for persons who would like to deposit a
fixed amount every month, with the purpose of getting a lump sum
after a few years. The little monthly savings in the Recurring Deposit
plan allow the saver to build up an attractive sum on maturity. Interest
rate in this kind of deposit scheme is calculable on quarterly
compounded based.
• Objective
• The main objective of recurring deposit account is to develop
regular savings habit among the public.
• In India, minimum amount that can be deposited is Rs.10 at
regular intervals.
• The period of deposit is minimum six months and maximum ten
• years.
• The rate of interest is higher.
• No withdrawals are allowed. However, the bank may allow to
close the account before the maturity period.
• The bank provides the loan facility. The loan can be given up to
75% of the amount standing to the credit of the account holder.
• Benefits
1. High-interest rate
One of the main benefits of recurring deposit account is the attractive
interest Rate. For instance, IDFC FIRST Bank offers 6.75% to 7.25% for a
recurring deposit. This is higher than savings account interest rates. Do
remember that the interest rates are per annum. The payout will only
be made at the maturity of the recurring deposit with quarterly
compounding. Recurring deposits are currently available only for
domestic and senior citizens in most banks.
2. No penalty if you miss a month
Previously, when savers for some unavoidable reason missed a
recurring deposit, they were forced to pay a monetary fine. But, those
days are gone. Customer-friendly financial institutions like IDFC FIRST
Bank have no penalty if you miss a month. Do, however, remember in
case of premature withdrawal before 30 days, no interest is payable. In
case of premature withdrawal of a recurring deposit after 30 days and
before 6 months, the interest rate you will get will be the fixed deposit
card rate applicable for 30- 45 days.
• Risk
1.Recurring Deposits are not subject to market risks: When you invest
in recurring deposits, you will receive the full monthly amount
deposited along with interest at maturity. The value of recurring
deposits is not affected by market conditions like other investment
options such as mutual funds and equity shares.
2)Risk of investing in the recurring deposit scheme of an institution that
is not credible: You should invest in a recurring deposit scheme of only
a reputed financial institution. Compare the schemes of institutions in
the segment and select a trustworthy company that offers you the best
interest rate on your investment. It’s not advisable to select a company
without conducting thorough research.
3)Risk related to premature withdrawal: There could be a case where
the investor requires funds and wishes to withdraw the deposited
amount before maturity. In such a scenario, the financial institution
may levy a penalty for premature withdrawal or give the depositor the
sum without the interest component.
• Return % by Indian bank
Recurring Deposit Interest Rates Bank wise
Bank Tenures (p.a.)
SEBI plays an important role in regulating all the players operating in
the Indian capital market. It attempts to protect the interest of
investors and aims at developing the capital markets by enforcing
various rules and regulations. Best Recurring Deposit Scheme in India
with Highest Interest Rates
Here are some banks that offer the best interest rates for RD schemes:
Bank Tenures (p.a.)
Central Bank of India RD Interest Rates 4.90% 5.00% 5.00% 5.00% 5.00%
City Union Bank RD Interest Rates 5.00% 5.25% 5.00% 5.00% 5.00%
Indian Overseas Bank RD Interest Rates 5.20% 5.25% 5.25% 5.25% 5.25%
Karur Vysya Bank RD Interest Rates 5.25% 5.50% 5.50% 5.50% 5.75%
Laxmi Vilas Bank RD Interest Rates 5.00% 4.75% 5.50% 5.50% 5.50%
Oriental Bank of Commerce RD Interest Rates 5.00% 5.10% 5.25% 5.25% 5.25%
Punjab & Sind Bank RD Interest Rates 5.15% 5.15% 5.30% 5.30% 5.30%
South Indian Bank RD Interest Rates 5.40% 5.40% 5.50% 5.50% 5.65%
For 2-year tenure, one of the best highest interest rates are offered by
Lakshmi Vilas Bank at 7.50% p.a. and then by Yes Bank at 7.50%.
For 3-year and 4-year tenures, you earn the best RD interest rates with
Lakshmi Vilas Bank at 7.50% p.a.
• Suitability
RD Features Applicability
Rate of interestBetween 5% to 8% (variable from one bank to
another)
Amount of minimum deposit
Long term investment
A long-term investment is an account on the asset side of a company's
balance sheet that represents the company's investments, including
stocks, bonds, real estate, and cash. Long-term investments are assets
that a company intends to hold for more than a year.
The long-term investment account differs largely from the short-term
investment account in that short-term investments will most likely be
sold, whereas the long-term investments will not be sold for years and,
in some cases, may never be sold.
Being a long-term investor means that you are willing to accept a certain
amount of risk in pursuit of potentially higher rewards and that you can
afford to be patient for a longer period of time. It also suggests that you
have enough capital available to afford to tie up a set amount for a long
period of time.
From Rs. 10 Tenure of investment Between 6 months and 10 years.
Frequency of interest calculation Usually every quarter.
• Benefits
PPF is one investment vehicle that falls under the Exempt-Exempt-
Exempt (EEE) category. This, in other words, means that all deposits
made in the PPF are deductible under Section 80C of the Income Tax Act.
Furthermore, the accumulated amount and interest is also exempt from
tax at the time of withdrawal. It is important to note that a PPF account
cannot be closed before maturity. A PPF account, however, can be
transferred from one point of designation to another. But, do remember
that a PPF account cannot be closed prematurely. Only in the case of the
account holder’s demise can the nominee’s file for the closure of the
account.
• Risk
Risk free investment: PPF investment is 100 per cent risk-free as it is a
Goal-backed small saving scheme, which is not linked to the stock market
movement. In case of bank default, one's PPF balance amount will
remain 100 per cent secured. Most importantly, the PPF balance won't
be added in ₹5 lakh insurance guaranteed by the GoI to bank account
holders.
• Return
Savings as a practice is an essential exercise to secure yourself
financially. However, keeping the rising costs of living and inflation in
mind, it does not suffice to merely apportion a part of one’s income as
savings while letting it sit idly. It is also crucial to opt for a suitable
avenue for channeling such funds to appreciate its value. Here’s where
a Public Provident Fund with guaranteed PPF returns and sovereign
backing as well as tax benefits, comes to the aid of such investors.
As an example, let’s assume Ramesh has started a PPF account from April 2019. At the
end of FY 2018 – 19, he had Rs.1.5 lakh as balance, including that year’s interest. He makes
a monthly deposit of Rs.5000 on the 10th of every month. The table below illustrates the
interest calculation for his PPF account.
Now, let’s consider an alternative example. In this instance, Ramesh makes his monthly
deposits on the 4th of every month. The table below represents the interest calculation
for his PPF account.
As can be seen, in the latter case, the PPF account return was higher by Rs.359. As this
effect is compounded over 15 years, the potential increase in yields while making deposits
before the 5th of every month is substantially higher than when making deposits after
the 5th.
• Suitability
PPF is a Government of India backed debt asset, suitable for long
terms financial goals such as children's education and retirement
planning. By investing in PPF, you can claim tax deductions under
section 80C up to Rs 1.5 lakh.
SEBI
SEBI is a statutory regulatory body established on the 12th of April,
1992. It monitors and regulates the Indian capital and securities
market while ensuring to protect the interests of the investors,
formulating regulations and guidelines. The head office of SEBI is at
Bandra Kurla Complex, Mumbai.
Protective Function
Regulatory Function
Development Function
1. Protective Functions
As the name suggests, these functions are performed by SEBI to protect
the interest of investors and other financial participants.
It includes-
Checking price rigging
Prevent insider trading
Promote fair practices
Create awareness among investors
Prohibit fraudulent and unfair trade practices
2. Regulatory Functions
These functions are basically performed to keep a check on the
functioning of the business in the financial markets.
These functions include-
Designing guidelines and code of conduct for the proper functioning of
financial intermediaries and corporate.
Regulation of takeover of companies
Conducting inquiries and audit of exchanges
Registration of brokers, sub-brokers, merchant bankers etc.
Levying of fees
Performing and exercising powers
Register and regulate credit rating agency
Learn about stock market with Basics of Financial Markets Course by
Market Experts
3. Development Functions
This regulatory authority performs certain development functions also
that include but they are not limited to-
Imparting training to intermediaries
Promotion of fair trading and reduction of malpractices
Carry out research work
Encouraging self-regulating organizations
Buy-sell mutual funds directly from AMC through a broker Investors.
They make the financial transactions smooth and safe.