Fixed Deposit Interest Rate: Multiple smaller FDs or one consolidated FD which will earn higher returns?

Fixed Deposits are gaining popularity among investors due to security of investment and higher return. Fixed Deposit schemes are offered by banks and financial institutions for a predetermined period. These deposits are considered low-risk investments, offering a fixed rate of return over a specified tenure, making them an attractive option for conservative investors. Many banks are currently offering higher interest rates on FDs compared to conventional savings instruments.  

Fixed Deposits (FDs) have long been considered a safe and reliable investment option for individuals looking to grow their savings with minimum risk.

When it comes to maximising returns on FDs, a common dilemma arises whether to put all your money in a single consolidated FD or split the investment into multiple smaller FDs. While you may choose a single large FD or multiple smaller FDs as per your need and risk calculation, both the options have their advantages and limitations.

Pros and Cons Of One Consolidated FD

Opting for a single consolidated FD simplifies the investment process, with a fixed interest rate for the chosen tenure. It offers simplicity, convenience and potentially higher interest rates.


1.      Simplicity: Easy management with minimal paperwork.

2.      Convenience: Lump sum amount at maturity for future planning.

3.      Higher interest rates: Potential preferential rates for larger deposits.


1.      Liquidity constraints: Limited access with penalties for premature withdrawal.

2.      Fixed interest rate: May miss out on potential rate increases as the banks keep on revising their FD interest rates.

Multiple Smaller FDs and Laddering

Splitting the investment into smaller FDs offers advantages, with staggered maturities but it has its own limitations.


1.      Higher interest rates: Benefit from varied FD interest rates.

2.      Improved liquidity: Access funds regularly without significant penalties.


1.      Complexity: Requires additional paperwork and tracking multiple FDs could be a tough task.

2.      Reduced convenience: Managing multiple FDs may be less convenient than a consolidated FD.

There is no fixed rule and you should choose a single consolidated FD or many multiple FDs depending on your financial goal and investment horizon.

By dividing your investment, you gain flexibility and access to funds at different intervals, which enhance liquidity. Varying tenures allow you to optimise interest rates and you can potentially reinvest it at higher rates for better returns. Diversifying across smaller FDs mitigates risk, as difficulties faced by one institution won’t affect your entire investment.

On the other hand, if you have large fund requirements and you are aiming to park your money in a secure investment instrument for the future then one single FD can also be suitable.  

It’s important to make informed decisions, evaluate your financial situation and goals carefully before finalising on FD investments. Seeking advice from a financial advisor on your FD investments can offer valuable insights for selecting the investment strategy that best aligns with your needs.

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