Now, whether interest rates rise or fall, your FD will remain unaffected! Learn how this smart investment strategy works..

FD Laddering Strategy: Banks frequently adjust FD interest rates, but who wants your fixed deposit (FD) interest rate to change every time? Now, there's a way to ensure that rising or falling interest rates don't impact your returns. It's called FD Laddering. In today's times, when bank FD interest rates are hovering between 7% and 8%, with further reductions expected, savvy investors are turning to FD Laddering. Let's explore this strategy, how it works, and how it will benefit your bottom line.

What is FD Laddering?

In simple terms, FD Laddering means not investing your entire amount in a single FD, but rather dividing it into multiple FDs with varying tenures.

What does this entail?

An FD matures every year (or every six months), giving you regular returns and allowing you to reinvest the proceeds at the current interest rate. This means that if rates rise, you'll earn higher interest on the new FD. If rates fall, your remaining FDs are already locked in at a higher rate.

How does FD laddering work?
Suppose you have ₹5 lakh to invest. Instead of keeping it in a single FD for 5 years, you divide it into five parts:

Your first FD will mature after one year. You now have two options: withdraw the money if needed or invest it again for another 5 years. If you reinvest the FDs that mature every year for 5 years, your "FD ladder" will continue, providing you with annual liquidity.

Why is this strategy important?

According to an SBI research report, FD rates have declined by 30 to 70 basis points since February 2025.
This means that interest rates could fall even further in the coming months.

In such a situation, FD laddering allows you to lock in today's high rates and protect yourself from future rate drops.

If rates rise later, you can reinvest your maturing FDs at the new rate.

This is why it's also called a "rate-proof strategy."

Three major benefits of FD laddering:

Liquidity and flexibility

If you suddenly need money, you don't need to break your FD. One FD matures every year. This means the money is automatically received, while the interest on the remaining FDs is protected.

Higher total returns

Long-term FDs generally have higher interest rates. If some of your money is locked in a 4-5 year FD, you'll benefit from these higher rates, while the remaining amount remains liquid for a shorter period.

Interest Rate Risk Protection

FD Laddering protects your capital from interest rate fluctuations. If rates fall, only the maturing FD will be renewed at a lower rate, not the entire amount. If rates rise, you can renew the new FD at a higher rate.

How to Start FD Laddering?
⦁ Determine your investment goal. Consider the number of years you want to invest.
⦁ Divide your capital into parts. For example, if you have ₹10 lakh, invest ₹2 lakh in each FD.
⦁ Create FDs with different tenures: 1, 2, 3, 4, and 5-year FDs.
⦁ Renew every time. Invest the FD that matures in a new 5-year FD.
⦁ Keep an eye on returns and rates. You can transfer to the bank that offers the best rates.

Disclaimer: This content has been sourced and edited from Zee Business. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.