Placeholder canvas
February 26, 2024
Business

How Do Fixed Deposits Help the Economy?

Fixed Deposit

From investment amateurs to stock market experts, ask anyone what their safest form of investment is, and you’ll find most of them favouring fixed deposits. Thanks to the lower risk, higher liquidity, and guaranteed returns attached to them, FDs have been a preferred investment option for different classes of investors.

Fixed deposits (FDs) have been a popular choice for investors for decades, offering the security of capital and reasonable returns. Despite the fact that FDs may not be the preferred choice for tax-efficiency purposes or offer returns comparable to high-risk equity investments, they are unlikely to lose their appeal anytime soon. Why? In moments of financial crisis and market volatility, FDs assure financial security and bring stability to the economy.

Here’s how a fixed deposit account can benefit investors and the economy.

Benefits of Fixed Deposits to Economy

1. Financial Inclusion

With an increase in the disposable income of middle-class households in the country, most are looking to invest their extra funds into profitable avenues. Fixed deposit accounts provide an opportunity to invest your funds for risk-free and guaranteed returns.

Given their safe nature and ease of investment, FDs will be preferred by even the most experienced or first-time investors. This inevitably brings remote areas into the purview of such investments, boosting financial inclusion in the economy. Thus, impacting deposit mobilisation over a period of time.

2. Stability in a Volatile Market

Even when most investment opportunities claim attractive returns and better liquidity, they are still subject to market volatility. That is why it makes sense to put your funds in an avenue that keeps your investment immune to market chaos.

Since FDs are safe from unpredictable market changes, they bring stability to the economy by offering you assured and steady returns. As a result, they make up the perfect investment option for risk-averse investors for their long-term financial goals.

3. Drives Banks’ Lending Capacity

With higher earnings and disposable income, the Indian middle class has more to save and invest in safe avenues like fixed deposits. As more funds are injected into the banking system, their lending capacity automatically shoots up – allowing them to offer more loans to individuals and businesses.

As these businesses expand, they create job opportunities, creating more money, higher disposable income, and increased inclination to invest. This ultimately creates a cycle of a higher inflow of funds in the economy.

4. Spurs GDP Growth

For a developing country to achieve sustainable economic development, it must focus on increased aggregate savings, which will contribute to higher investments. And fixed deposits are the foundation of better savings habits and higher financial growth in the country.

A higher level of savings and investment contributes to GDP growth, creating opportunities for higher capital investment. This, eventually, leads to a higher rate of economic growth in the country.

To Sum Up

A fixed deposit account is the simplest investment tool to consider if you’re looking for risk-free returns to achieve your financial goals over a period of time. And the fact that they contribute to a stable and growing economy only adds to their charm.

So, what are you waiting for? Check out the best fixed deposit accounts from top banks in the country and get ready to invest for a secure future.