Monitor fixed deposits for better profits

Financial consultant say that one should buy equities and then forget about them for a few years. But this invest-and-forget loom can exact a high price when it comes to debt investments. Ask Mumbai-based Anil Mhatre.

Five years ago, he invested Rs 25,000 in a fixed deposit and then forgot all about it. He finally woke up in 2011, two years after the deposit had matured. When he approached the bank, they couldn't find the records relating to his investment. Mhatre finally had to knock on the doors of the banking ombudsman to get his money back. Though he got it back, he lost out on the interest for the two years after maturity.

Mhatre might seem like an quirk, but his case underlines the need to keep track of your fixed deposits. When you make a deposit, a bank asks you whether you want to opt for auto renewal on completion of the term or want to take the maturity amount.

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It's tempting to go for the auto renewal option so that even if you oversleep like Mhatre Van Winkle, you don't lose out on the interest after the deposit matures. Says BR Bhatt, general manager, Corporation Bank: "Almost 90% of the investors are opting for auto renewal."

This facility suits people like Mhatre who have no time to way their fixed deposits. However, auto renewal may not be the best option for investors, especially in the current scenario, when the interest rates on deposits of certain tenures can be far higher. If the investor has opted for auto renewal, he may be missing out on an opportunity to earn a better rate. This can be as high as 1 % point.

"If you don't provide an instruction, the deposit will be renewed at the prevailing rate for the same tenure. At that time, maybe an 18-month deposit offers a better rate," says VN Kulkarni, chief counsellor at Abhay Credit Counselling Centre, a Bank of India initiative.

Source: [ET]