Why is Fixed Deposit the most Preferred Saving Option

According to a recent survey conducted by the SEBI (Securities and Exchange Board of India), the citizens of India prefer fixed deposits (FD) as their preferred saving option when compared to pension schemes, mutual funds, and other such investment options. Let’s understand why!

An overview

In accordance with a recent survey organized by the SEBI, a sweeping majority of the Indian urban households, a popular ninety-five percent of the Indian citizen population preferred to manage their savings with the help of fixed deposits with only 9.7 percent prefer to invest their savings in mutual funds or the stock market.

Most Preferred Saving Options

Fixed Deposit

A fixed deposit is a financial tool which is provided by a bank or a financial institution and provides its investors a much higher rate of interest than the usual savings account until the date of maturity. The rate of interest provided by Indian banks usually ranges from 4 to 7.25 percent.

Life insurance

Illness is a situation which cannot be predicted. It is why a majority of the banks in India provide Life Insurance schemes which you, as a customer can benefit from. According to the survey by SEBI, life insurance scheme was the second most preferred option for saving after fixed deposits.

Current Saving Scenario in India

The SEBI extended this initiative to rural India but unfortunately, due to the lack of awareness and education, a large majority of them were not aware of mutual funds and other such schemes. To give more exact data, less than one percent of the rural Indian population was knowledgeable about such schemes offered by the banks and other financial institutions.

On the brighter side of things, the number of investors in India has been steadily increasing. Seventy-five percent of the urban population that had been surveyed stated that they had made a conscious effort to learn about and participate in the securities and stock market for the first time in almost five years. In accordance with this survey, data has been found that there are a total of 3.37 crore households in India that are investors, out of which seventy percent belong to the Indian urban population.

Other Preferred Schemes

After the most preferred option of Fixed deposit followed by life insurance as voted by the urban population of India; the next thing to be used in terms of saving is precious metals particularly gold and silver, then post office saving instruments then followed by real estate and property.

According to the exact data provided by the survey, mutual funds were placed sixth on the list, with only 9.7 percent of the population wanting to use it for savings purposes, followed by stocks and securities (an 8.1 percent of the Indian urban population) finally followed by pension schemes, company deposits, debentures, derivatives, and commodity features.

The Bottom Line

Savings are essential, and a large majority of the Indian urban population prefers fixed deposits as vehicles for saving investments. This is because FDs yield higher returns with no risks involved. One can even close FDs before they mature, especially in times of contingencies. Not only do these help in saving taxes but also helps in taking loans if required. Needless to say, benefits of fixed deposits are many, and this is one of the primary reasons why people in India are still investing wholesomely in Fixed Deposits.