Fixed Deposits vs. Government Bonds: Which is Safer?

Disclaimer: Ujjivan Small Finance Bank does not offer Government Bonds. This blog is written for generic information only.

July 12, 2025

fixed-deposits-vs-government-bonds-which-one-is-safer

When it comes to investing our hard-earned money, safety is always a top priority. We want our investments to grow steadily without the risk of losing the principal amount. Two popular investment options that offer stability are fixed deposits (FDs) and government bonds. In this blog, we will conduct a comparative analysis of fixed deposits vs. government bonds to determine which option is safer.

 

Fixed Deposits: A Reliable Investment Option

Let's start by understanding fixed deposits, which are offered by banks and non-banking financial companies (NBFCs). When you invest in an FD, you deposit a certain sum of money for a specific period at a fixed interest rate. At the end of the chosen period, you will receive principal amount and the interest accrued.

 

What makes FDs unique?

  1. Assured returns: FDs offer a guaranteed return on your investment, making them a popular choice among risk-averse investors.
  2. Flexible tenure: FDs come with various tenures ranging from 7 days to 10 years, allowing you to choose the duration that suits your financial goals.
  3. Regular income: You can opt for monthly, quarterly, or annual interest payouts, providing you with a steady income stream.

 

Are All Types of Fixed Deposits Safe?

When you talk of fixed deposits, you must distinguish between bank fixed deposits and those offered by Non Banking Finance Companies (NBFCs). Bank deposits are safe, especially as we have not heard of any defaults from private banks, government banks or small finance banks on their deposits. 

 

Government Bonds: A Secure Investment Avenue

Now let's turn our attention to government bonds, also known as government securities. These bonds are issued by the central and state governments to raise funds for developmental activities. Investing in government bonds means lending money to the government for a fixed period at a predetermined interest rate.

 

Why are government bonds considered safe?

  1. Backed by the government: Government bonds are backed by the sovereign power of the country, making them among the safe investment options. 
  2. Credit risk is minimal: Since governments have the power to tax their citizens, the chances of default on bond payments are very low.
  3. Regular interest payments: Government bonds provide regular interest payments, which can be a dependable source of income.

 

Comparing fixed deposits vs. government bonds: Which is safer?

Both Bank fixed deposits and government bonds offer safety and stability. On the other hand, as mentioned earlier, NBFC Fixed Deposits may pose an element of risk. However, there are a few key differences as well to consider:

 

 Government BondsBank FDs
Rate of returnGovernment bonds generally offer slightly lower interest rates than FDs due to the lower risk involved.Bank FDs can offer you higher rate of returns. Currently, banks like Ujjivan SFB offer high returns on FDs. 
Tenure flexibilityGovernment bonds usually have fixed maturities.Bank FDs provide more flexibility in choosing the tenure. 
LiquidityGovernment bonds are less liquid and typically have a lock-in period.FDs allow premature withdrawal, although with penalties.

 

To make an informed decision between fixed deposits and government bonds, it's essential to consider your financial goals, risk appetite, and investment horizon. You would need to do some comparative analysis before investing. If you're looking for higher returns over a longer period, government bonds might be a better option. On the other hand, if you prefer liquidity and shorter investment tenures, FDs can be more suitable.

Final Thoughts

In conclusion, when it comes to choosing between fixed deposits vs. government bonds, both bank fixed deposits and government bonds are safe investment options, while NBFC Deposits may pose an element of risk. The choice between the two depends on your individual needs, goals, and risk tolerance.

 

Looking to grow your savings faster? Ujjivan SFB offers a wide range of fixed deposit products. Select the FD of your choice and take a step forward to your financial goals. Alternatively, you can browse through Ujjivan SFB product suite - our wide range of financial products are designed to make your financial life better.

 

Disclaimer:

The contents herein are only for informational purposes and generic in nature. The content does not amount to an offer, invitation or solicitation of any kind to buy or sell, and are not intended to create any legal rights or obligations. This information is subject to updation, completion, amendment and verification without notice. The contents herein are also subject to other product-specific terms and conditions, as well as any applicable third-party terms and conditions, for which Ujjivan Small Finance Bank assumes no responsibility or liability.

 

Nothing contained herein is intended to constitute financial, investment, legal, tax, or any other professional advice or opinion. Please obtain professional advice before making investment or any other decisions. Any investment decisions that may be made by the you shall be at your own sole discretion, independent analysis and evaluation of the risks involved. The use of any information set out in this document is entirely at the user’s own risk.  Ujjivan Small Finance Bank Limited makes no representation or warranty, express or implied, as to the accuracy and completeness for any information herein. The Bank disclaims any and all liability for any loss or damage (direct, indirect, consequential, or otherwise) incurred by you due to use of or due to investment, product application decisions made by you on the basis of the contents herein. While the information is prepared in good faith from sources deemed reliable (including public sources), the Bank disclaims any liability with respect to accuracy of information or any error or omission or any loss or damage incurred by anyone in reliance on the contents herein, in any manner whatsoever.

 

To know more about Ujjivan Small Finance Bank Products Visit:"https://www.ujjivansfb.in"

 

All intellectual property rights, including copyrights, trademarks, and other proprietary rights, pertaining to the content and materials displayed herein, belong

to Ujjivan Small Finance Bank Limited or its licensors. Unauthorised use or misuse of any intellectual property, or other content displayed herein is strictly prohibited and the same is not intended for distribution to, or use by, any person in any jurisdiction where such distribution or use would (by reason of that person’s nationality, residence or otherwise) be contrary to law or registration or would subject Ujjivan Small Finance Bank Limited or its affiliates to any licensing or registration requirements.

   

Apply Now 

FAQs

1. What is the difference between fixed deposits and savings accounts?

Fixed deposits offer higher interest rates than savings accounts but come with a fixed tenure and withdrawal restrictions.

2. Are fixed deposits taxable?

Yes, the interest earned on fixed deposits is taxable. It is added to your total income and taxed as per the applicable slab rate.

3. Can I break my fixed deposit before the maturity period?

Yes, you can break your fixed deposit prematurely, but it may attract a penalty and result in a lower return on investment.

4. Are government bonds risk-free?

Government bonds are considered one of the safest investment options due to their low credit risk and sovereign backing.

5. Where can I find the resources to do a comparative analysis between fixed deposits vs. government bonds?

To do a comparative analysis between both you have plenty of resources available on the internet. 

6. What happens if a bank defaults on fixed deposit payments?

In case of bank defaults, the Deposit Insurance and Credit Guarantee Corporation provides insurance cover of up to ₹5 lakh per depositor per bank.

7. How much minimum amount I must have to invest in a fixed deposit?

The minimum investment amount for fixed deposits varies from bank to bank, typically ranging from ₹1,000 to ₹10,000.

8. Are government bonds suitable for long-term investments?

Government bonds are suitable for long-term investments as they offer stable returns over the investment tenure.

9. How often is the interest paid on government bonds?

The interest on government bonds is usually paid semi-annually or annually, depending on the terms of the bond.

10. Fixed deposits vs. government bonds, which should I choose?

In choosing between Fixed deposits vs. government bonds, you would need to examine your returns, risk tolerance, liquidity and the time period for which you want to invest the amount. 

Latest Blogs