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However, in March 2024, some banks increased their fixed deposit rates. In the case of most banks, the current fixed deposit interest rates being offered are at a decadal high. So, are these the best interest rates on fixed deposits? And should you lock into these high fixed deposit rates? Let us discuss.

Also Read: Fixed deposit news: Bank of India revises FD rates. How they compare with SBI, ICICI, HDFC Bank

Interest rates of fixed deposits

Let us compare the current fixed deposit interest rates that are being offered by some private, public, and small finance banks (SFBs).

Big private sector banks: Fixed deposit interest rates

Let us look at the interest rates being offered on various FD tenures by some big private sector banks.

(Source: Websites of respective banks, as of 1st April 2024)

The above table shows that among big private banks, IndusInd Bank is offering one of the best FD interest rates of 7.75% p.a. for a tenure of 1 year 7 months to 2 years.

Also Read: These banks offer higher FD interest rate above 7 percent. Details here

Public sector banks: Fixed deposit interest rates

Let us look at the interest rates being offered on various FD tenures by some big public sector banks.

(Source: Websites of respective banks, as of 1st April 2024)

The above table shows that among big public sector banks, 4 banks are paying the same interest rate of 7.25% p.a. However, the Bank of Baroda is offering the 7.25% p.a. rate for the highest tenure of above 2 years and up to 3 years.

If we compare the FD interest rates of big private banks and PSU banks, some private banks like IndusInd Bank and Kotak Bank are offering better interest rates.

Also Read: Ujjivan SFB raises fixed deposit rates, offers up to 9% interest for senior citizens. Check latest FD rates here

Small private sector banks: Fixed deposit interest rates

Let us look at the interest rates being offered on various FD tenures by some small private sector banks.

(Source: Websites of respective banks, as of 1st April 2024)

The above table shows that among small private banks, RBL is offering a higher interest rate of 8.10% p.a. for a tenure of 546 days to 24 months.

Let us compare the FD rates of small private banks with those of big private banks and PSU banks. Here also, most small private banks are offering higher FD interest rates.

Also Read: Best FD rate? This bank is offering 9.25% on fixed deposits for senior citizens

Small finance banks: Fixed deposit interest rates

Let us look at the interest rates being offered on various FD tenures by some small finance sector banks.

(Source: Websites of respective banks, as of 1st April 2024)

The above table shows that most small finance banks are paying an interest rate of 8.5% p.a. and above on FDs of various tenures. Unity SFB is paying a higher interest rate of 9.00% p.a. for a higher tenure of 1,001 days.

When we compare the SFB FD interest rates, they are better than those of PSUs, small and big private banks.

DICGC insurance cover for bank deposits

Some people are not comfortable investing in FDs of small finance banks as they consider them risky. Please note that all deposits of every customer with every bank are insured for Rs. 5 lakhs. The Deposit Insurance and Credit Guarantee Corporation (DICGC), a 100% subsidiary of the RBI, provides insurance coverage against a bank failing or going into liquidation. The customer doesn’t need to pay the insurance premium as the bank pays it. SFB deposits are also covered under the DICGC insurance cover.

Also Read: Fixed Deposit (FD): 3 Tips To Help Maximise Returns

Should you lock into current FD rates?

In April, at the start of the financial year, many investors review their investment portfolio for rebalancing. When reviewing your fixed income allocation, you may invest some money in bank fixed deposits at the current high interest rates. 

However, do note that fixed deposits (except for five-year tax-saving FDs) don’t qualify for deduction from taxable income under Section 80C of the IT Act. Also, the interest earned on FDs is added to the individual’s overall income and taxed at the slab rate.

In the case of most banks, the current interest rates being offered are at a decadal high. Also, the interest rates are expected to go down in the second half of 2024. Hence, if you are looking to park some money in fixed deposits, this is a good time to lock into the current high interest rates.

Gopal Gidwani is a freelance personal finance content writer with 15+ years of experience. He can be reached at LinkedIn.

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Published: 05 Apr 2024, 01:40 PM IST

By just opening a demat account, you gain access to trading various instruments like stocks, bonds, derivatives, currencies, and commodities. The other benefit is that you can also take part in IPO (initial public offering) bidding, receive dividends, and obtain bonus shares directly into your account.

Besides the demat account, there is another account known as a ‘trading account’. Although trading and investing are closely related, there’s a subtle distinction between the two.

Trading involves frequent buying and selling of shares with the aim of profiting from short-term stock price fluctuations. On the other hand, investing entails purchasing company shares with the intention of becoming a shareholder, participating in the company’s growth, and potentially earning capital gains through stock appreciation and dividends if the company distributes dividends.

Also Read: Demat: How does share transfer work in case account holder passes away?

For example, if you purchase a share and sell it for a profit within a short time frame, it’s considered trading. However, if you hold onto the share for a longer period, it’s categorised as investing. The demat account serves as the storage space for these shares. 

In India, NSDL (National Securities Depository Limited) and CDSL (Central Depositories Services India Ltd) are the two depository services that offer demat accounts, serving as custodians responsible for safeguarding shares stored in demat accounts. 

Depository participants (DPs), or stockbrokers, act as intermediaries between individuals and depositories, facilitating the creation and management of demat accounts.

Demat and trading accounts are distinct offerings provided by depository participants. If you’re a trader, you can open a trading account, whereas if you’re an investor, you can opt for a demat account. 

In some cases, traders may have multiple trading accounts but only one demat account. In such situations, they may wonder if it’s possible to link all their trading accounts to the single demat account they hold.

 In this article, we’ll delve deeper into this topic to provide clarity.

Also Read: Demat account: How to invest in international stocks? Here are 4 ways

Limitations of linking demat accounts to trading accounts

There’s a limitation to linking trading accounts from different depository participants to a single demat account. Most brokers restrict this practice due to operational challenges they may face.

For instance, if you have a demat account with your bank but choose to open a trading account with a discount stockbroker, many brokers won’t allow you to link the demat account from your bank to their trading account.

Let’s say a broker does permit clients to sell shares held in a demat account from another DP through their trading account. In such a scenario, the client must ensure timely settlement of the trade by transferring the stocks to the broker’s pool account within the stipulated timeframe. 

However, if the client fails to transfer the shares on time, the stocks may be subjected to auction. Consequently, the client may be required to cover the difference between the selling price and the auction price.

Also Read: Demat Account: How to choose between full-service and discount brokers?

Some DPs do offer the option to link multiple trading accounts to demat accounts, but these linked accounts are typically considered secondary and may come with certain limitations.

Can I hold multiple demat accounts? 

If you’re currently holding a demat account and considering opening another one with a different depository participant, you’re free to proceed. The process for opening a second demat account is similar to that of the first—you’ll need to submit the required documents as per the standard procedure.

Please note that you are not allowed to open multiple demat accounts with the same depository participants or stockbrokers.

Also Read: What are the KYC norms for opening a demat account?

There’s no restriction on the number of demat accounts you can maintain simultaneously. You’re allowed to have multiple demat accounts concurrently, each serving as a repository for your investments and transactions.

Having multiple demat accounts offers several advantages. It provides you with diverse perspectives on buying and selling stocks, granting access to various research insights and platforms offered by different stockbrokers. This diversity can enhance your decision-making capabilities as an investor.

However, managing multiple demat accounts can be challenging. It requires time and effort to monitor and handle each account, especially since different brokers have varying features and requirements. Additionally, maintaining multiple demat accounts means dealing with numerous documents, which can be cumbersome and may pose challenges in terms of organisation and security.

Also Read: How does a demat account facilitate trading in derivatives?

FAQs

How should I choose a stockbroker for opening an account?

When selecting a stockbroker for opening a demat account, consider it similar to choosing a bank for a savings account. Key factors to consider include:

Convenience: Check proximity to your office or residence and their business hours.

Comfort: Research the reputation of the stockbroker, any past associations with the organisation, and whether they offer the specific services you require.

Cost/Level of Service: Compare service charges levied by different stockbrokers and their service standards.

Do I need to maintain a minimum balance of securities in my demat account?

No, there is no requirement for a minimum balance in your demat account as prescribed by the depositories (NSDL and CDSL). You can maintain a zero balance in your demat account.

Can I transfer all my securities to another demat account and close my current demat account?

Yes, you can transfer all your securities from multiple demat accounts with one or more stockbrokers to another account. 

What is a Basic Services Demat Account (BSDA)?

A Basic Services Demat Account (BSDA) functions similarly to a regular demat account but typically has no or low annual maintenance charges.

Can I link one bank account to multiple demat accounts?

Yes, you can link one bank account to multiple demat accounts if they are held with different stockbrokers. However, you cannot link more than one bank account with the same stockbroker for demat accounts.

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Published: 05 Apr 2024, 02:48 PM IST