New Delhi, Tech Desk. FD Investment Risk: Bank Fixed Deposit (FD) has always been known as a safe investment option. This type of investment has the potential of high returns with low risk. Banks offer higher interest rates in bank fixed deposits. But do you know that there are 5 types of risks involved in fixed deposits as well. Let’s know the complete details about it

fund withdrawal risk

Fixed deposits are invested for a fixed period of time. For example, if you have kept the lock-in period of the FD at 5 years, then after 5 years you will not be able to withdraw the funds before maturity. You will incur a loss if you withdraw the funds before maturity. Also, you cannot withdraw money online from FD. You will have to visit the bank for its paperwork.

default risk

Under the new rule, if your bank sinks, then you will get insurance up to a maximum of Rs 5 lakh under the new rule. Meaning if you have invested Rs 20 lakh, then you will get maximum insurance of Rs 5 lakh as bank damages.

inflation risk

Inflation plays an important role in your FD returns. Meaning, if FD is getting 8 percent interest and at that time the inflation rate is 6 percent, then the effective return rate will be only 2 percent.

high tax

If you are above 60, you will get Rs 50,000 tax exemption on fixed deposits. But the income from FD of a person who is less than 60 years of age will be taxable. This tax will be levied according to your slab.

reinvestment risk

When the FD matures, you can withdraw the money, or you can reinvest it. In case of FD reinvestment, you will be offered the current rate of interest. In such a situation, you will not be able to enjoy the upcoming interest increase. They can enjoy higher interest in case of having cash.

Edited By: Saurabh Verma