We quite often come across various deposit schemes from banks.
Some time we get confused to select the right scheme. If you understand the way interest is calculated and the periodicity by which you wish to avail the interest and the maturity proceeds,all your confusions will get cleared. Your return on the deposit depends on just three factors.
Excepting the rate of interest ,other two factors depend on your requirements. So your job is simplified in looking for the Bank offering highest interest for the period of deposit you intend to keep with the bank. As per existing norms for calculation of interest ,it is uniform among the banks.Interest on your deposit is calculated at the specified rate and compounded quarterly. The fixed deposit schemes can be classified under two broad category. Ordinary Fixed Deposit wherein you receive the interest every quarter. We may call this "Non-Cumulative Fixed Deposit" or simply "Fixed Deposit" For example if you deposit Rs100000 for one year at interest 10 % pa, you will receive Rs2500 on completion of every quarter and the Principal amount on completion of the deposit period(here 1 year).
In the other scheme called as Cumulative Deposit Scheme, as you are not availing the quarterly interest, Banks take it as your investment and give additional interest for the same. Hence you earn more interest than what you otherwise earn under Non-Cumulative Fixed Deposits. Under Cumulative Deposit Scheme ,Interest will be paid on completion of Deposit Period. If you deposit Rs100000 for one year at interest 10 % pa, you will receive Rs110381 on completion of one year- Rs10381 being interest. You receive Rs381 more than what you may get under Ordinary Fixed Deposit Scheme.
For the convenience of depositors who want to receive interest every month, Banks have a scheme called "Monthly Interest Deposit Scheme". Under this scheme,you will get interest on every month. As you are receiving the interest before it is due for credit, interest under this scheme will be a little bit less than what you may get under Ordinary Fixed Deposit Scheme. You will get interest of Rs826 every month.Total interest will be Rs9912 To put it in a nutshell,apart from receiving your deposit amount on completion of deposit period you will receive towards interest as under:
So you can choose the deposit scheme as per your requirement forgetting about the hundreds of names ascribed by different banks. Please follow the link given above for Deposit Interest Rates of Select Banks. Use the calculator to compare interest and the Maturity values for different deposit schemes.
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