Budget impact: High share of FDs in investment can hit your wealth creation

Though FD insurance cover has risen 5-fold, younger investors should use those to park short-term funds

The long-awaited hike in insurance cover for bank fixed deposits (FDs) was finally announced by the finance minister in the Union Budget. From Rs 1 lakh earlier, it has now gone up to Rs 5 lakh per depositor.

This hike alone should not, however, motivate investors to put more money in FDs, as poor post-tax returns, especially for those in the higher tax brackets, could affect their ability to build wealth over the long term.  

The move comes in the aftermath of the Punjab and Maharashtra Co-operative Bank fraud that left over a million depositors in the lurch.

Banks pay