FD RISK Whether it is a bank (PSU Bank) or a private Bank, its fixed deposit attracts everyone. It is considered a safe investment as compared to other means of investment options, as it promises you a fixed return. At the same time, you also know that we are going to get so much money after so many days.
The good thing in bank FD is that it has nothing to do with the volatility of the stock market. That is why its return is not affected by the stock market. But, you should also know that some risk is also associated with the bank FD. We are telling you these are the five dangers that are linked to it.
Liquidity FD Risk
An FD can be easily broken, but if it is broken before maturity date, some penalty is levied. What penalty will be unmounted on FD this bank rate bank may be different. If you have invested in a tax saving FD, you can withdraw it even before a period of 5 years, but then you will not get the facility of income tax savings.
Risk of Default
In the banking system, the risk of default of a bank is very low, but even then there is a problem in the event of a crisis. Because, deposit Insurance and Credit Guarantee Corporation insures only up to Rs. 5, 00000 on your deposit. If there is more money and the bank sinks, you have also sunk the money.
Risk of inflation
The amount of return in the bank FD is already fixed. But if the rate of inflation in the economy is increasing rapidly, your FD returns will come down. In a way, there is no arrangement to avoid inflation. For example, sbi’s FD rate has now gone down considerably. And, the rate of inflation is also going on in the vicinity.
Dangers associated with reinvestment
The market is still declining interest rates. In this case, you choose the reinvestment option in FD. If you choose this option, that amount will automatically be reinvested. But, here you have to keep in mind that if the interest rate in the market is further reduced, your FD will not be at the old rate, but it will be at a reduced rate of interest.
Interest rate threats
If you have made a 5-year FD, then your amount is automatically lock-in period. Suppose you have now made an FD for 5 years at a 4-century annual interest in a bank and later the interest rate increases, you will be paid at the old interest rate. It is not that your return will also increase if the interest rate increases.
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