Fixed Deposit: Bank FD rates have gone up, should you invest? Experts answer

livemint.com:

fixed deposit (FD) interest rates across tenors. SBI has increased FD rates by 75 basis points or bps (0.75%)—from 4.75% to 5.5% for deposits maturing between 46 days and 179 days. For longer tenors, the rate hike has been restricted to 25 bps (0.25%).SBI has increased interest rates for 180 days to 210 days from 5.75% to 6% and for those from 211 days to less than a year from 6% to 6.25%.

HDFC Bank has followed suit by increasing FD rates by up to 20 bps (0.2%). The rates for FDs with a tenor of 2 years 11 months to less than three years have been increased to 7.15% from 7%. Interest on FDs from 3-year 1 day to 4 years and 7 months has been revised upwards from 7% to 7.2%.Bank FDs are no doubt a safe investment option compared to fixed income mutual funds (MFs).

But there are several factors that one should consider before deploying funds. Here is a summary of what investors should keep in mind while making their choice about fixed income investments.

Bank FDs are one of the most secure investment options. It works well for senior citizens who want a stable and regular income.

But the entire spectrum of fixed income MFs including fixed maturity plans, long duration debt funds, gilt funds and liquid funds offer higher returns than bank FDs.Long duration debt funds, which invest mostly in fixed income securities issued by the ‘Government of India’, were the best performers among debt MFs, delivering returns of about 7.9% for the one-year timeframe. Fixed maturity plans, which are considered a proxy for FDs among debt MFs as they invest heavily in certificates of deposits issued by banks, provide a 1-year return of 6.9%. In contrast, bank FDs with a similar tenure give only around 6.5% interest.“Bank FDs usually offer