Splitting ₹10 lakh into a ladder
Instead of one ₹10 lakh FD, some people book several smaller ones with different end dates, for example five FDs of ₹2 lakh each for 1, 2, 3, 4 and 5 years. Every year one FD matures. You can use that money or renew it, with no penalty for breaking a deposit early.
There is another reason to split a large sum. Deposit insurance covers only up to a fixed limit per bank, so people with ₹10 lakh or more often spread it across two or more banks.
Frequently asked questions
What is the monthly interest on a ₹10 lakh FD?
At a 7% example rate, the first year's interest of about ₹71,859 averages roughly ₹5,988 a month. A monthly payout FD pays a little less than that average. Senior citizen rates and your bank's own rate will change the figure.
How much interest will ₹10 lakh earn in 1 year?
About ₹71,859 at 7% a year compounded quarterly, so the FD matures at ₹10,71,859. The effective yearly yield works out to about 7.19%. Banks offer different rates for different tenures, so compare before booking.
What does a ₹10 lakh FD give in 3 years?
Roughly ₹12,31,439 at the 7% example rate, of which ₹2,31,439 is interest. For 2 years it is about ₹11,48,882. Remember that tax on the interest is due every year at your slab rate.
What if I need part of the ₹10 lakh before 5 years?
If it is all in one FD, you would have to break the whole deposit and usually accept a lower interest rate on it. That is why many people split ₹10 lakh into smaller FDs. The 5-year interest of ₹4,14,778 assumes you hold till maturity.
