Increasing your returns

MONEY MATTERS

By applying with a senior citizen or combining funds, better returns can be attained through fixed deposits.

With rising inflation (12.01 per cent for week ended July 19) and falling stock market returns, investors are busy looking for options whereby they can earn a little more from their investments.

As far as fixed deposits go, banks offer rates up to 9.5 and 10 per cent to garner funds. However, there are some other ways to jack up the rates of returns from fixed deposits. We discuss options below:

The employees of financial institutions: The present and former employees of banks are offered a preferential rate of interest that is the normal rate plus a certain markup.

This additional per cent is usually, between 0.5 per cent and 1 per cent over the normal rates. Several public sector banks provide an additional 1 per cent to past employees when they deposit with them. This additional per cent raises the rate of return and can make a large difference to the overall rate of earnings.

For instance, if the rate of a one-year deposit is 9 per cent and an additional 1 per cent is offered to employees, the person will earn 10 per cent. So, a deposit of Rs 10,000 would earn Rs 11,000, instead of Rs 10,900. Investing in banks through relatives, therefore, could spruce up the returns on fixed deposits.

Senior citizens: This is another category where the investors stand to gain. The differential between rates for normal investors and senior citizens is between 0.25 per cent and 1 per cent.

For instance, a private bank offers different rates of returns, to the tune of 1 per cent, in case of deposits of over six months and 0.75 per cent for deposits of 1-2 years. For the first six months,often there is no differential between rates.

If a senior citizen is investing directly, it often makes sense to do some homework and study the rates being offered by different banks to get the best returns. But even if you are not a senior citizen, you can take this route by investing with your retired parents. A joint investment would help both of you to earn good returns.

High amounts: Another option that can be considered is to look at investing higher amounts that will qualify for a special rate of interest. Known as bulk deposits, many high net worth investors are able to take advantage of this. Usually a sum of Rs 15 lakh as a single deposit qualifies an investor for a higher rate. Then there can be different rates for slabs like Rs 15-50 lakh or Rs 15 lakh-1 crore and so on.

If two or more family members can come together and make a higher deposit, the overall returns will be higher.

However, care needs to be taken regarding the interest earnings because they would have to go to into a joint account preferably.

This will ensure that there isn’t a disproportionate burden on only one person.

The writer is a certified financial planner