Best avenues to invest in 2017 to get higher returns

The last quarter of 2016 saw one of the most landmark decision taken by an incumbent Prime Minister in the country’s 69-year history since its freedom. PM Narendra Modi, with inputs from the Finance Ministry, brought into effect the demonetisation of Rs.500 and Rs.1,000 notes. This move, although took the country into a near meltdown, has somewhat appeared to stabilise the economy for the long haul.

However, one of the prime effects of demonetisation was that avenues that were deemed profitable for investors lost their charm. In this article, we will talk about a few instruments you can invest in to get better returns for your money.

• Post Office Recurring Deposit

The age-old Indian post office has undergone a major paradigm shift over the last few years in a number of ways. Of the many, one of the things that stand out is the introduction of deposit schemes. These schemes offer good returns for investors and is almost matchable with fixed deposits of similar terms. At the time of writing this article, post office deposits offer 7.3% returns, which compounds quarterly, for a 5-year period. Read More

For instance, a regular Rs.100 investment will yield a return of Rs.7,250.50 returns once the scheme matures.

• Public Provident Fund (PPF)

Public Provident Funds (PPFs) has long been one of the most preferred investment avenues for a vast majority of risk-averse working professionals. These funds mature after a 15-year period and offers an opportunity to renew for 5 years every time from there on. Besides, PPF is also eligible for tax deduction under Section 80C of the Income Tax Act.

• Sukanya Samriddhi Account (SSA)

SSA is basically available for parents of a girl child, which enables them to invest so as to build a corpus to fund the education and other things relating to the girl. This account requires a minimum of Rs.1,000 to be opened and the guardian can add multiples of Rs.100 every time they want to add to the account. The account has an upper limit though, meaning parents can only invest a maximum of Rs.1.5 lakhs per calendar year. A benefit of this account is that it is available for tax deduction while the returns non-taxable. Also, the maximum interest such accounts offer stands at 8.5%

• National Savings Certificate

National Savings Certificate (NSC) is yet another save avenue that offers guaranteed returns. Currently, the returns offered stands at 8% for a five year term. An account can be opened for as less as Rs.100 while there is no upper limit to the amount that can be invested. An advantage of this fund is that you can use it as collateral for any loans.

These are some of the best investment options you can invest in if you are tired of fixed deposits and their falling interest rates.

Lookout for the best bank deposits

With the bank’s revising their interest rates offered on fixed deposits, it has become hard to work out which banks are offering the best interest rates on fixed deposits.

The banks began cutting down the interest rates on fixed deposits towards the end of 2014 as the Reserve Bank of India cut rates by 75 basis points. Across one to five years, most banks lowered their interest rates by 50 to 75 basis points. Few banks like Canara bank, Punjab National Bank, Indian Overseas Bank, United Bank of India, Vijaya Bank and Oriental Bank of Commerce have made deeper cuts. Canara Bank reduced the interest rate on deposits of one to five years from 9 percent to 8 percent in the past four months. Since the interest rates are on a downward cycle, further rate cuts are expected. Lakshmi Vilas Bank fixed deposits and Karur Vysya Bank fixed deposits are offering the best rates.

Longer term deposits’ options

Investing in a longer term deposit makes sense at this stage as shorter term deposits will offer you less interest on the money you will invest. In case you have no immediate need, then consider investing in deposits from three years to less than five years. For the three to less than five year term, Lakshmi Vilas Bank fixed deposits and DCB Bank fixed deposits are currently offering the highest interest rate at 8.6 percent. It also offers fixed deposits for a minimum opening balance of Rs.100. the interest is compounded on a quarterly basis for the cumulative deposits made. The interest pay-out option is also made available. DCB has a minimum deposit of Rs.10,000 and if you are choosing the cumulative option, then the interest will be compounded. DCB deposits can be opened online.

Karur Vysya Bank on the other hand offer slightly lower rates on their fixed deposits. The bank offers 8.5 percent for the three year time frame deposits. Currently, it is hard to predict how the interest cycle will unfold and it is not wise to opt for fixed deposits for tenures of five years and above. It is also advisable to go for a cumulative option if you require a regular monthly cash flow.

Shorter term deposits

It is ideal to invest for at least three years. Lakshmi Vilas Bank will pay 8.6 percent interest for deposits of one year and above. DCB offers 8.55 percent interest for deposits between 12 and 24 months. Karur Vysya Bank, Andhra Bank and TMB will offer you 8.5 percent interest on one to two year deposits.

Then there are also the special deposits schemes that will offer higher rates. TMB’s has 555-day deposit that gives 8.6 percent interest and State Bank of Patiala offers 8.52 percent interest on one to 555 days deposits.