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Make the most of special deposits

Many bank now offer a variety of special deposit schemes, giving investors an opportunity to earn higher interest from heir fixed deposits.

business Updated: Nov 23, 2008 20:23 IST

Many bank now offer a variety of special deposit schemes, giving investors an opportunity to earn higher interest from heir fixed deposits.

There are several characteristics specific to these deposits and hence need to be handled with care. This will ensure flow of overall benefit to the investor and help him tackle the tough market conditions that are being witnessed across asset classes.

Special schemes
There are different types of fixed deposit options that banks offer. These include deposits of specific time maturity and any investor can make use of the options here at any time.

There is regular change in the interest rate of these deposits as per changes witnessed in the interest rate environment and changes made by the bank. This makes the special deposit schemes stand out because they represent a new opportunity for deposit for a specific time period that is likely to be outside the normal tenure of deposits. Many banks are currently offering this facility to raise funds.

Specific days
In most cases the specific deposits are for particular number of days like 400 days or 750 days and so on. The difference here is that the interest rate available for the investor will be different from normal tenure deposits.

In most cases there is a slightly higher interest rate here because the bank wants to attract more investors towards this deposit. Banks need to raise funds for a specific time period and due to this reason they offering deposits for specific time period under the banner of special deposits.

Limited period
The most important factor that an investor has to understand is that special deposits might not be present for a long time. This is because they are offered as a special case — for raising funds.

When a bank no longer requires additional funds, or when its target is reached, there is a good chance that the special scheme will be discontinued. In a situation where rates are once again on a downward spiral, it is likely that banks will no longer continue with the special deposits. Investors who want to take advantage of the situation would do well to take the opportunity when the scheme is still in motion and complete their investment.