Fixed Deposits
Undoubtedly fixed deposits are the best investment choice for regular customers and senior citizens. Fixed deposits are well known for flexible tenure which ranges from 7 days to 10 years and assured returns. Talking about flexible tenure, it is the most secure investment which can be picked up for short-term, mid-term as well as long-term. Amid the current low-interest rates regime of leading banks, you may not want to invest in them, but there are some small finance banks that may give higher returns than what private and commercial banks are offering on their fixed deposit schemes.
For 1-year fixed deposits there are small finance banks that currently give you an interest rate up to 6.75% and thus are also insured by DICGC up to Rs 5 lakhs. Talking about 1-year fixed deposits you can also invest in a fixed deposit scheme of private sector banks and post office. In a post office time-deposit account, you can get an interest rate of 5.5% on 1-year deposits. On the other side, private sector banks are offering interest rates of up to 6.10% on 1-year fixed deposits. Here are the top 5 banks which are currently promising higher interest rates on 1-year fixed deposits.
| Small Finance Banks |
|
|
|
| Banks |
1-Year FD Rates For Regular Citizens |
1-Year FD Rates for Senior Citizens |
W.e.f. |
| Utkarsh Small Finance Bank |
6.75% |
7.25% |
July 1, 2021 |
| Ujjivan Small Finance Bank |
6.50% |
7.00% |
March 5, 2021 |
| ESAF Small Finance Bank |
6.50% |
7.00% |
May 2, 2021 |
| Suryoday Small Finance Bank |
6.50% |
6.75% |
June 21, 2021 |
| Equitas Small Finance Bank |
6.35% |
6.85% |
June 1, 2021 |
| Private Sector Banks |
|
|
|
| Banks |
1-Year FD Rates For Regular Citizens |
1-Year FD Rates for Senior Citizens |
W.e.f. |
| RBL Bank |
6.10% |
6.60% |
July 2, 2021 |
| Yes Bank |
6.00% |
6.50% |
June 3, 2021 |
| IndusInd Bank |
6.00% |
6.50% |
June 4, 2021 |
| DCB Bank |
5.70% |
6.20% |
15 May, 2021 |
| Karur Vysya Bank |
5.25% |
5.75% |
08.07.2021 |
Recurring Deposits
Recurring deposits work just like fixed deposits but the twist is, in fixed deposits, you have to make a lump-sum deposit and in recurring deposits, you have to make a monthly contribution just like a mutual fund SIP. Recurring deposits are well known for their safety, higher interest rates, and best for short-term goals. Investing in recurring deposits are highly preferred for risk-averse investors who do not want to welcome market-based returns in their portfolio.
One can make the best out of an RD scheme if he or she stays invested for the entire maturity term, as making a premature withdrawal may lose interest rates. In this scenario making mutual fund SIPs can be a decent choice. But if getting risk-free returns in the short-term is your only goal, then here are the top banks that are currently promising higher interest rates on recurring deposits.
Arbitrage Mutual Funds
For new investors or investors with a low-risk appetite, arbitrage mutual funds can be a good pick. These are the mutual funds that have their asset allocation across cash and derivatives markets to provide returns to the depositor. To maximize returns, it primarily exploits price differences between present and future instruments. To take advantage of differing prices, the fund managers of these hybrid funds buy and sell shares in multiple markets simultaneously in order to generate returns.
Since the purchasing and selling price of stocks are well known to the fund manager, arbitrage mutual funds tend to be less risky. Because they are equity funds, they are eligible for the same tax benefits as equity-based instruments. As a consequence, investing in arbitrage mutual funds for a year might be a good option for the tax benefits available for equity funds and reasonable average returns of 4 to 6 percent. Here are the 4 best performing arbitrage mutual funds to invest in 2021, based on rating and returns.
| Funds |
1-year returns |
3-year returns |
5-year returns |
AUM |
NAV as of 7 July 2021 |
Rating by Value Research |
| Edelweiss Arbitrage Fund |
4.38% |
5.98% |
6.32% |
Rs 5,503 Cr |
Rs 15.97 |
5 star |
| Nippon India Arbitrage Fund |
4.37% |
5.93% |
6.32% |
Rs 11,792 Cr |
Rs 22.14 |
5 star |
| L&T Arbitrage Opportunities Fund |
4.57% |
5.85% |
6.23% |
Rs 4,488 Cr |
Rs 15.80 |
4 star |
| Kotak Equity Arbitrage Fund |
4.44% |
5.80% |
6.15% |
Rs 20,291 Cr |
Rs 30.71 |
4 star |
Post Office Time Deposit
Just like a fixed deposit account of banks, it is a term deposit scheme provided by India Post. Post office term deposit account comes with a maturity period of 1 to 5 years. It is among the best and safe debt instruments to bet for short-term goals, as it is backed by the government of India. In post office term deposit account, interest rates are payable annually but are revised on a quarterly basis. The interest received is added to your income and taxed according to your income tax bracket. One can open a post office time deposit account with a minimum amount of Rs 1000 and in multiples of Rs 100 with no maximum deposit limit.
A post office time deposit account can be opened individually, jointly (up to 3 adults), or on behalf of minors. For the quarter of July to September 2021, the government has recently kept interest rates unchanged for small savings schemes. A post office time deposit of one to three years will earn an interest rate of 5.5 percent. Whereas a 5-year deposit term will earn an annual interest rate of 6.7 percent per annum.
Debt Mutual Funds
Investors with a low-risk appetite, short-term goals, and seeking steady income can invest in debt mutual funds. Debt funds are less turbulent and thus less risky than equity funds, mid-cap funds, and small-cap funds. Those looking to invest in market-linked instruments for less than a year can invest in low-duration debt funds. Low duration debt mutual funds are the funds that invest over the course of 6 to 12 months across money market and debt instruments.
4 Best High Rated Debt Mutual Funds Better Than PPF
The reason behind picking-up low duration debt funds for you is, these funds may provide a reasonable level of return for a modest level of risk for your short-term financial goal. But before investing in low-duration debt funds, investors should and should keep in mind various risks such as credit risk, interest rate risk, inflation risk, reinvestment risk, etc. Here are the 5 best performing low-duration debt funds to invest in 2021, based on rating and returns.
| Funds |
1-year returns |
3-year returns |
5-year returns |
AUM |
NAV as of 7 July 2021 |
Rating by Value Research |
| Aditya Birla Sun Life Low Duration Fund |
5.45% |
8.05% |
7.94% |
Rs 16,526 Cr |
Rs 559.73 |
5 star |
| Kotak Low Duration Fund |
5.41% |
8.02% |
8.16% |
Rs 12,765 Cr |
Rs 2811.68 |
5 star |
| JM Low Duration Fund |
3.75% |
5.59% |
6.22% |
Rs 128 Cr |
Rs 29.76 |
5 star |
| Axis Treasury Advantage Fund |
4.79% |
7.62% |
7.56% |
Rs 10,158 Cr |
Rs 2512.31 |
4 star |
| HDFC Low Duration Fund |
5.99% |
7.82% |
7.73% |
Rs 24,543 Cr |
Rs 48.27 |
4 star |
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