FD: A Safe Investment with the Highest Security Ratings

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There are numerous investment options in the market like FD,mutual funds, shares, etc, but the volatility demands investors make informed decisions to reduce the risk involved. The price change degree is high in the stock market, which makes it highly volatile. As market volatility increases, the potential profit also increases. But individuals with a high-risk profile only may want to consider the volatile stock market. Therefore, many individuals look at fixed-income investments, like fixed deposits (FDs). 

As the stock market continues to show volatility, FDs become essential to an investment portfolio to balance the risk. Your earnings from your FDs will be fixed and stable throughout the tenor as FD returns are not linked to the market. And in this rising interest rate scenario, more investors are falling for FDs. 

Bank FD interest rates are increasing as the Security Exchange Board of India (SEBI) raises the key policy rates. Financial analysts find it a more favourable scenario for FD investors – calculate FD interest at a higher rate. The next meeting of the Reserve Bank of India (RBI) and Monetary Policy Committee (MPC) is scheduled for September 28-30, 2022. They may raise interest rates for the fourth time to fight against rising inflation. 

Is Every Fixed Deposit Safe?

Here ratings for fixed deposits come into the role. FDs offer safe returns, but it does not mean any FD will do. You must plan your FD investment diligently to earn secure and high yields. Therefore, choose an FD that offers high security to your invested principal and ensures high returns.

Primarily, two reputable credit agencies – ICRA (Investment Information and Credit Rating Agency of India) and CRISIL (Credit Rating Information Services of India Ltd) – assign ratings to different FDs based on various comparative standings. 

Why are Fixed Deposit Ratings Necessary?

The interest rate on fixed deposits is the first thing investors look at while picking an FD issuer. It is also crucial to check the FD ratings assigned.

Credit ratings are based on a thorough background check of the FD and the financial institution. A high rating ensures capital safety as it means there is a low probability of bankruptcy. 

Also, it is a regular process. Therefore, investors should know the current rating of the FD and the issuer before investing. Considering the old ratings, you are likely to invest in unsafe FDs. 

Therefore, FD ratings are necessary, helping investors to: 

  • Know about the instrument’s safety
  • Identify credible financier 
  • Assess the financier’s ability to pay the interest and the principal without default. 
  • Make informed decisions in investment planning.

You can calculate FD interest before planning your investments to make informed decisions. It will help you to know the applicable interest rate on your FDs.

What are the Highest Security Ratings by ICRA and CRISIL? 

Credit agencies in India – ICRA and CRISIL – rate various investment options, including FDs. They have specific ranking systems and rating scales based on several metrics to rate a financial instrument. It includes liquidity, maturity profile, and renewal rates. Let us understand their methodology and criteria for placing an FD on their rating scales.

ICRA

  • [ICRA]AAA is the highest FD rating on the ICRA’s Long-Term Rating Scale, with a maturity period of more than one year.
  • And [ICRA]A1 is the highest FD rating on the ICRA’s Short-Term Rating Scale, with a maturity period of less than one year.

CRISIL 

CRISIL follows a 14-point rating scale (FAAA to FD) for FDs with a maturity of more than a year. The agency’s rating scale is (CRISIL A1+ to CRISIL D) for short-term FDs with a maturity of less than one year. 

  • CRISIL’s highest rating is CRISIL AAA (Highest Safety). It means FDs with a CRISIL AAA rating possess the lowest credit risk. 

The rating for banks is generally higher than for non-bank financiers.

Bank Fixed Deposits – Safe Avenue 

Now is a great time to plan your FD investments and protect your funds with an assurance of returns. To add to your financial health, you can consider bank FDs. Reputable banks offer their high-rating FDs with an insurance cover. Investing in a bank FD with the highest stability rating is wise to ensure your money is never at risk. 

What is a National Savings Certificate (NSC) And How To Invest In It?

Bank fixed deposits can offer you as high as 7% returns. FD interest rate depends on your chosen tenor and type of FD primarily. For example, a cumulative FD can benefit you with earnings on FD interest. Also, Senior citizen Fixed Deposit is for individuals aged 60 to 80 years and super senior citizen FD is for individuals aged 80 years and above. Senior investors can earn 0.50% more on their FDs, and super senior citizens can earn 0.75% more.Investors can calculate FD interest rates beforehand using an online FD calculator available for free at the bank’s official website.

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