Pretty high probability of that happening, you would say. Interest rate increases with the tenure of deposit. As fixed deposits are illiquid instruments, the higher the lock-in period, the higher the rate of return offered. This is because the risk to the investor increases with time. But, for some companies like HDFC Ltd., where the risk remains limited even in the longer tenure, the higher rate of return of 10 per cent for a 3-year deposit is definitely worthwhile.
Companies offering fixed deposits also offer a variety of options on receiving interest.
Monthly, quarterly, half-yearly and yearly options exist in most companies. The monthly option is particularly useful for investors who require a monthly income to meet their expenses. The investor can also opt for a single compounded return at the end of the maturity period of the deposit. Fixed deposits also carry some tax implications. Tax is deducted at source if the interest paid is more than Rs 5,000 per annum.