Have bank FD beyond Rs 5 lakh? BEWARE! You may lose your money; here is how to stop it

Bank FD (Fixed Deposit) is one of the most popular investment tools among Indian investors. To make it even more precise - bank FD is one of the most popular investment options for short-term investors. However, if we go by the experts' advice, an investor investing in Bank FD may lose money in case the bank becomes a defaulter. The chances are remote, but we have seen some banks in big difficulty in recent times. If an investor is slated to get an amount in excess of Rs 5 lakh as maturity amount, then such investors won't get more than Rs 5 lakh, in case of bank default. Yes, they will get only Rs 5 lakh and not more. According to investment experts, this is because only up to Rs 5 lakh of a bank depositor's money is insured. 

So, how to ensure this does not happen? Experts advised bank depositors to invest in Post Office fixed deposit instead of bank fixed deposit as post office investment is hundred per cent backed by the central government as it falls under the centre's small saving schemes.

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Comparing Post Office FD and bank FD, Balwant Jain, a Mumbai-based tax and investment expert said, "In the case of bank deposits, one's money up to Rs 5 lakh is secured. However, in the case of bank default, the depositor will have to lose money beyond Rs 5 lakh. From the security point of view, post office FD is better than bank FD but people prefer bank FD as banks offer better service than the post office."

Speaking on the advantages of post office FD, Jitendra Solanki, a New Delhi-based tax and investment expert said, "For small investors, fixed deposits for the period of 3 and 5 years is quite popular. For such investors, the security of the money is an important factor and at the same time, they are getting around 1.4 per cent more annual return too."

So, for those investors who have plans to invest in a fixed deposit scheme, post office FD can be the better option if they are worried about bank defaults. If an investor is mulling to invest for the period of 5 years Bank FD, post office FD will yield 6.7 per cent. In private and other public banks, it ranges between 5.3 per cent to 5.35 per cent.