FD versus FMP. Which is better ?

Here is a simple difference between FD and FMP.

• A common feature of both FMPs (Fixed Maturity Plans) and FDs (Fixed Deposits) is that investors know in advance how much return they will earn on maturity
• The difference here is that while the returns on FDs are assured, returns on FMPs are indicative
• FMPs are actually close-ended debt funds with fixed maturity offering an indicative yield. The keyword here is ‘indicative’
• That means, on maturity there is a possibility of actual returns deviating from indicative returns
• On the other hand, returns are guaranteed by an FD and investors are assured of receiving the same on maturity (assuming there is no default in payment of principal amount and interest)

Why do FMP yields vary?

• FMP yields do not normally vary by a significant margin
• For the same tenure, the yields on debt instruments (with comparable credit ratings) are usually in a range, which is why FMPs of similar tenure have comparable yields
• The difference in yields between two FMPs arises out of the risk taken on in the portfolio – a FMP having top rated instruments in its portfolio would deliver comparatively less than a FMP with lower rated papers
• Higher return means that the fund manager has been taking on more credit risk in the portfolio

An Advantage of FMP.
Fixed Maturity Plans (FMP) are alternate ways to keep your savings so as to get better post tax returns than fixed deposits (FDs). These are debt funds which do not invest in equities and hence free from volatility risk linked to stock markets. These are available for different terms ranging from 1 month to 5 years with periodic liquidity.
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Where to invest ?
The answer to the question totally depends on you how much return you want? Where ever you get higher returns you would obviously invest you money there.

Tata Motors Fixed Deposit Plan Schemes

Tata Motors recently announced its Fixed Deposit plan, which is open for subscription to Resident Indians, NRIs, HUFs and Registered Societies, among others.

The fixed deposit plan has generated quite a bit of excitement, as it gives a yield of 12.83% on its 3 year — Cumulative Deposit Plan. Remember, this is the yield and not the interest rate. The interest rate remains 11%, which is still pretty high for a fixed deposit.

Tata Motors Fixed Deposit Plan Schemes

Here are the two schemes that an investor can choose from:

Scheme A

Quarterly Income Plan

Scheme B

Cumulative Deposit Plan

Tata Motors Fixed Deposit Plan - For NRIs

NRIs can invest in the Fixed Deposit Plan if they deposit the amount from their NRO Account and this amount doesn’t represent an inward transfer from a NRE / FCNR (B) account. Interest will be deposited in this NRO Account and NRIs need to submit their Indian address while making the application.

Tax Deduction at Source

Tax will be deducted on source from the interest of this Fixed Deposit Plan according to the provisions of the Income Tax Act 1961 for residents and NRIs.

For NRIs — the tax will be deducted at source, as the current provisions of Income Tax Act 1961 doesn not allow interest exemption on interest earned from deposits with companies.

Subscription to Tata Motors Fixed Deposit Plan

You can subscribe to this plan through your broker. ICICI Direct has a link to it where you can subscribe to it online. If your broker doesn’t have the facility to subscribe to this plan — then you can also submit the application form at select bank branches. via

A smart decesion to get good return on FD is to lock them now.

One of the only investment which gave positive return after Jan 2008 is Bank FD.
With an average interest rate of 9% pa FD's act as a stable source of income.
Now its hight time to take a FD and lock it due to certain reasons -

• Banks are cutting key interest rates.
• Inflation is lowering.

What should you do?

Should you lock in? If you are getting a good rate and you have funds available with you for some time, go ahead. "You will not be able to get that rate for the next few quarters," says Ashish Kapoor. For a retired person who wants regular income, it makes a lot of sense to put his money in an FD now.

"In many cases, individuals want to keep money available for a possible market upswing," says Vishal Kapoor. Consider this factor before locking your funds in an FD.

Earlier, there were options like fixed maturity plans which aren't so attractive now. via

A smart decision thus lies in locking your FD for good returns.