Fixed Deposit Vs Fixed Maturity Plan: Dr. Subhashini Suresh, Rathinam Institute of Management, Coimbatore

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In India, there are many Fixed Deposit Lovers, as per survey of SEBI in India, 95% of Indian Families choose FD, Out of total Rs 154.43 lakh crore deposits, private banks holds Rs 46.23 lakh as on March 2021. Out of these only less than 10% are keen on Investments in Mutual funds and Stocks. What is really sounding in these deposits, Our history tells that the interest rates were higher in the 1990’s of about 11-12% in 1995 to 1997, and the interest rates started to decline to 2020-21 at 5.00 to 5.35% for one to three year Deposit rates.

Historical one year FD with call money.

We expect these rates to reduce further in the coming years, so the fixed deposit lovers have to take a call on how to explore the opportunities instead of Fixed Deposit. Here, a wonderful investment option is Fixed Maturity plan. It is like Fixed Deposits, Lock in period and can help to save income tax. The lock in period varies from one month to three years. The FMP invest on debt related investment like Bonds, debentures, Government Securities, CD and CP. The difference between FD and FMP is FD on assured, While FMP better returns. FD are made based on trustworthiness on bank, while FMP are done based on credit ratings, and they can go through the investment objective and performance of the fund. The tax on the FD is applicable based on interest earned, while in FMP there are options Dividend and Growth option, In Dividend option, the investor face dividend distribution tax and in Growth option, we have Short term and Long term Capital gain, Indexation benefit on LTCG. For a higher tax bracket investment to FMP are better than FD. FMP are less risky, and cannot eliminate risk possibility of default.

Scheme Name AuM (Cr) 1W 1M 3M 6M YTD 1Y 2Y
Nippon India Fixed Horizon Fund 40 – Series 3 – Direct Plan – Growth Fixed Maturity Plans – Debt 138.22 0% 8% 9% 11% 14% 21% 16%
UTI Fixed Term Income Fund- Series XXX – Plan IX – (1266 Days) – Direct Plan – Growth Fixed Maturity Plans – Debt 77.48 0% 7% 8% 10% 14% 15% 11%
HDFC FMP 1846D August 2013 (1) (27) – Direct Plan – Growth Fixed Maturity Plans – Debt 247.03 0% 1% 2% 3% 7% 8% 9%
Kotak FMP Series 239 – (1330D) – Direct Plan – Growth Fixed Maturity Plans – Debt 797.06 0% 0% 1% 3% 6% 7% 9%
Edelweiss Fixed Maturity Plan – Series 55 – 38M – Direct Plan – Growth Fixed Maturity Plans – Debt 103.54 0% 0% 1% 2% 5% 6% 8%

About Author:
Dr. Subhashini Suresh, DECE., AMIECE.,C.E.,MIE., MBA., Ph.D.,(CFA)., Obtained a Ph.D at Bharathiar University in 2015 in Management Discipline and pursing my CFA- Level 1. As an Associate professor- Head of the Department of Management Studies at Rathinam Institute of Management, valuable experience of 10 years academic and 20 year plus on Industry in Stock markets and handling mentoring for both major and non-major specialization in the areas of Business Administration, Insurance & Risk Management, Data Analysis, Finance, Econometrics, Statistics Modelling,Corporate Finance,Portfolio Management of academic and non- academic disciplines.  In addition to the classroom instruction, she is a Chairperson for Board of Studies, framing the curriculum and syllabus being in an Autonomous Institution and Member in Governing Body.  As a chairperson of research board undertake research projects and nurturing on Entrepreneur and working Research Projects from State and Central Government of India like EDI, College Infrastructure development projects, Society wellbeing etc. and consultancy. Have won 4- patents with more than 15 plus international and national journals and contributing articles in the weekly finance magazine as content writer and analyst.

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