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Fixed Deposits (FDs) have always been a popular means of investment in banks. In this, investors not only get assured returns but also reduce the risk. But, in reality it is not so. Investment advisors believe that even though FDs are considered as the least risky investment option, it also has its limitations. In this, there is a risk of losing your money if the banks default. There is no facility to withdraw funds before maturity. Inflation also affects FD interest. There are five such risks, which should be kept in mind while getting an FD.
risk of default
There have been cases of sinking of some small cooperative banks. In such a situation, the risk on the investors’ deposits increases. Under the new rule, in case of sinking of a bank, insurance is available up to Rs 5 lakh on the total deposit. In such a situation, if you have made an FD of Rs 15 lakh in a bank and that bank sinks, then you will get a maximum of Rs 5 lakh only. The remaining Rs 10 lakh is in danger of drowning.
No withdrawal of funds before maturity
Investments are made in FDs for a fixed period. You cannot withdraw funds before this period. Suppose, you have made a tax saving FD, which has a lock-in period of five years, then you can withdraw funds only after maturity. Withdrawal of funds before maturity may result in loss to you. Also, many banks do not offer the facility of online withdrawal from FDs. In such a situation, you have to go to the bank branch and do the paperwork for withdrawal of funds.