November 28, 2022

Marriot Plaza

The health authority

Alternatives to fixed deposits when interest rates are falling

It is good to look for alternatives to FDs amid falling interest rates
Fixed deposits are a good investment choice for conservative investors who have a low-risk appetite and are looking for steady interest returns. Fixed deposits are simple and easy to open with any bank. All you have to do is pick a period for which you will keep your money and you will receive guaranteed interest income in return. These deposits are also not vulnerable to market volatility. 


Due to all these reasons, fixed deposits are a popular investment choice in India. A 2019 survey by the Securities and Exchange Board of India (SEBI) revealed that 95% of families prefer to park their savings in fixed deposits rather than invest them in other instruments. However, the interest rates of fixed deposits have been continuously declining over the last decade. The rate went down from about 8.2% in 2011 to 7.9% in 2014 and now to about 5% in 2021. 

Hence, it’s financially prudent to consider investment alternatives that offer higher returns and can bring you closer to meeting your financial goals. 

Alternatives to fixed deposits 


Here are some of the alternatives to fixed deposits to consider including in your investment portfolio: 


  • Debt mutual funds: Debt investors invest in less risky investments such as government debt, treasury securities, and alternative investments. Because they invest in high-quality fixed-income assets, they are seen to be safer than other mutual funds. These investments, however, can sometimes be subject to diminishing returns and appreciation.

  • Liquid funds: Liquid funds are a form of debt fund that solely invest in high-rated money market securities with maturities of 91 days or less. The main advantage of liquid funds is that they give flexibility, whereas fixed deposits do not. As a result, you may utilise liquid funds not just as a substitute for fixed deposits, but also to build an emergency reserve to fall back on in times of crisis. Because they invest in high-quality products, they are perhaps one of the most secure asset classes.

  • Government-issued bonds: Even when the yields on treasury securities are only marginally better than those on deposit accounts, they are perhaps the most well-known alternatives to bank deposits in India. These investment products have a longer lock-in period, but they provide the investor with the option of diversifying their investment.

  • Equity investment trusts: It is a kind of close-ended fund that invests in the stocks of public companies. Equity investment trusts are an excellent option to earn returns that beat inflation. They are a good alternative to long-term bank deposits, with returns that are often larger than fixed deposit Account. However, like with any equity-linked investment, they are subject to the risk of market volatility.  


  • Fixed deposits for corporations: For investors prepared to accept a bit more risk, corporate regular savings alternatives, which are nothing more than fixed deposits issued by corporations, are available. A corporate fixed deposit has considerably greater interest rates than a bank fixed deposit with variable tenure choices. The disadvantage of this type of investment is that it is not as safe as bank deposit accounts, and buyers must only invest in corporate deposits of well-managed and known firms.



To build an investment portfolio that is effective, you have to select investments depending on their performance and how well they align with your risk tolerance and financial goals. You can also consult a financial expert to help with figuring out the asset allocation that’s right for you.