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With the 25 basis points repo rate cut by RBI, banks may further slice interest rates on fixed deposit schemes. If you are worried about lower returns on your fixed deposits, here is a good option you can consider. South-based City Union Bank’s special deposit scheme for 500 days offers you the highest interest among other bank FD schemes.
Attractive returns
City Union Bank offers 10 per cent annual interest under its special 500-day deposit scheme with the interest being compounded quarterly. Most other banks offer 9 per cent or less under their 1-2 year FD schemes. The minimum amount you need to deposit under this scheme is Rs 5,000. Interest is paid on a quarterly basis. You can opt for a monthly pay-out too.
Withdrawal penalty
Similar to other FDs, you can avail loan on this scheme too. The interest on the FD loan may be 2 percentage points higher than the deposit interest rates. In case you opt to pre-close your fixed deposit, you will be eligible to receive interest only at the rate applicable for the period until which your money was parked with the bank. In addition, the bank will charge you a penal interest of 1 per cent in case you withdraw the deposit before maturity.
The bank also offers online FD transaction facility for existing customers.
The tax treatment under this scheme is comparable to other FDs. Interest income beyond Rs 10,000 will attract a TDS of 10 per cent if you fail to provide a 15G/15H declaration stating that your interest income is within the exemption limits.
Low risk
A volatile stock market has tempered risk appetite among Indian investors. In the current backdrop of rising corporate fraud, it is pertinent to ensure safety of principal while pursuing attractive returns. Bank FD is the safest investment choice for a conservative investor. Any sum up to Rs 1 lakh is secured by deposit insurance. In the event of the bank going bust, your principal is safe and will be paid by the insurer. Hence deposit of any sum less than a lakh practically carries zero risk.
City Union Bank has strong presence in the South and is aggressively expanding footprint in this market. The bank currently operates through 336 branches across the country.
For the nine month period ending December 2012, its total income grew by over 30 per cent to Rs 1,784 crore driven by a robust rise in the interest income. Net interest margin stood at 3.3 per cent during the same period. Net profit rose 15 per cent during the first nine months to Rs 240 crore. The bank managed a healthy 23 per cent growth in deposits as on December 2012. The net non-performing assets stood at 0.6 per cent as on December 2012.
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