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How to use Fixed Deposit Laddering to Maximise your returns?

06 Apr 2024

Have you ever felt unsure about where to park your precious savings? Sure, a Fixed Deposit (FD) is a safe bet, but are you getting the most out of it? Here's where FD laddering can help you earn more from your bank savings account. It's not just another financial jargon but a practical way to make your money work harder for you. This blog will explore this strategy in detail, helping you understand how it can fit into your financial portfolio.

Understanding Fixed Deposit laddering

Fixed Deposit laddering is a strategy that involves spreading out your funds in FDs over different periods to optimise returns and maintain liquidity. This is how it works. Instead of locking or blocking all your funds in a single FD, in FD laddering, you create multiple FD with varying maturity dates. This approach offers several advantages. Let's look at some of these in detail.

  • Periodic FD maturity: By laddering, you avoid putting all eggs in one basket. You have FDs maturing at different times, providing regular access to funds.
  • Risk mitigation: fixed deposit interest rates do fluctuate. Laddering reduces the risk of renewing a large FD at a time when interest rates may be low.
  • Liquidity management: Having FDs maturing at different intervals ensures you have access to cash without breaking an FD prematurely. Premature breakage of FD can attract penalties.
  • Maximises interest earnings: Fixed Deposit laddering can increase your overall interest earnings. Since longer term FDs typically offer higher interest rates, spreading FDs across various terms allows you to capitalise on these higher rates while still maintaining some short term, lower rate FDs for liquidity.
  • Adapts to personal cash flow needs: You can personalise this strategy to suit your specific financial needs. If you anticipate the need for some cash at certain times, you can align the maturity of some FDs to these dates, ensuring you have the money when you need it.
  • Tax efficiency: By staggering the maturity of FDs, you can potentially manage your tax liabilities more effectively. Interest from FDs is taxable, so having FDs mature in different financial years can help in spreading out your tax burden.

How does one go about setting up the FD ladder?

Much like other strategies, a simple plan is enough to start fixed deposit laddering. It might sound daunting at first, but is pretty simple once you get the hang of the steps. Here is how you can start implementing the FD laddering strategy:

  • Diversify maturity periods of the FDs: The first step is to allocate your savings funds into smaller amounts for the planned multiple FDs. Then plan out the maturity duration into the future for the FDs with varying maturity periods. This could range from short term duration such as a year to longer spans such as three years or more. This division allows you to benefit from different interest rate cycles and maintain a steady flow of maturity funds.
  • Reinvest maturity proceeds: As each FD reaches its maturity, the smart move is to roll it over into the FD with the longest duration within your laddering system. This technique enables the power of continuous compounding of interest, potentially amplifying your returns over time.
  • Monitor interest rates: Keep a close watch on the evolving fixed deposit interest rates. If you observe a spike in rates, it is a good opportunity to reinvest your matured FDs at these higher rates, boosting your overall returns.
  • Align with financial goals: Set your FD ladder to align with your financial goals. If you have a significant expense coming up in a few years, you can plan your FDs to mature around that time, ensuring you have the funds when needed.
  • Balance tenure and rates: Aim for a balance between tenure (FD duration) and interest rates. While longer tenures typically offer higher rates, they also tie up your funds for extended periods. Mixing in some shorter tenure FDs can provide a balance between good returns and availability of funds.
  • Regular reviews and adjustments: Financial markets are dynamic, so it is wise to regularly review your FD ladder. Based on the latest market conditions and your personal financial situation, you might need to adjust your laddering strategy.

Benefits of fixed deposit laddering

  • Optimised returns: By continuously reinvesting at potentially higher rates, you could earn more than by locking in a single long term FD.
  • Regular liquidity: Regular maturities provide funds for emergencies or other financial opportunities.
  • Interest rate risk reduction: This strategy cushions you against the risk of putting a large sum when rates are low.

Let us understand this using an example

For example, say you have INR 5,00,000/- to invest. Instead of one FD, you open five FDs of INR 1,00,000/- each, maturing in one, two, three, four, and five years, respectively. As each FD matures a year apart, it creates a ladder. Then there is again an opportunity to renew or utilise the funds as per your financial requirement. This way, you can enjoy higher returns and regular access to a portion of the funds conveniently.

Factors to consider before opting for FD

Selecting the right bank for opening a FD is crucial. Consider banks that offer high interest fixed deposit rates. Look for ones that provide the benefits of fixed deposits with flexibility and low penalties for premature withdrawal. Here is what you should look for:

  • Reputation and stability of the bank: Research the bank's history and stability. Banks that have a strong record and good customer reviews can offer greater confidence. The security of your Fixed Deposits with banks is better. Stability is key, especially when considering long-term investments.
  • Customer service and accessibility: Evaluate the bank's customer service, including the ease of opening and managing FDs, responsiveness to customer queries, and the availability of online banking services. Efficient and accessible customer support can significantly enhance your FD experience.
  • Additional benefits and features: Look for banks that offer additional perks, such as auto-renewal options, loan facilities against FDs, or better rates for senior citizens. These extra features can provide added value to your investment and offer more flexibility in managing your financial portfolio.

DCB Fixed Deposit:

You can open DCB Fixed Deposit and enjoy a variety of fixed deposit benefits such as:

  • Attractive high fixed deposit interest rate of up to 8.00 % p.a.
  • Flexible interest payment options such as monthly, quarterly, half yearly, yearly
  • Automatic fixed deposit renewal
  • Upto 0.60 % p.a. additional interest for Senior Citizens
  • Quarterly compounding option


Fixed deposit laddering is a smart way to manage your funds in FDs. It offers a balance between earning a good return and having funds available when you need them. By implementing this strategy, you can optimise your earnings and maintain financial flexibility.

Start maximizing your Fixed Deposit returns


Information on the website is for informational purposes only and does not constitute financial advice. Readers are advised to consult financial professionals for personalized advice before making decisions. The information on this blog is subject to change without notice and may become obsolete. DCB Bank reserves the right to modify, update, or remove content at any time. Savings Account and Fixed Deposit Interest rates are subject to change without prior notice. DCB Bank shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decision based on the contents and information mentioned in this blog. By accessing and using this blog, users agree to adhere to these terms and conditions. To read the complete disclaimer of DCB Bank, please visit: https://www.dcbbank.com/disclaimer

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