I rely on Private commercial Bank FD's with good returns. HDFC Banks gives 7.3% currently. I don't trust Cooperative banks even if they have slightly better Interest rates.
I usually invest the amount in FD's of 1 Lac chunks for 1 year period. This this gives the max returns and money will also keep coming back each year. So its not getting locked in for long lengths of time. In addition, if I ever need money urgently, I can liquidate required number of FD's in multiples of 1 Lac. Don't need to have the hassle of breaking a 5/10 lac FD and losing interest when I need just 1 Lac.
Govt bonds might also be a good idea if you don't need the money any time soon, but need it to be secured.
Thing that should be noted is that bank FD's have fairly low, but guaranteed returns, but they are also not secured. People often forget this aspect in assuming that they are more safe than mutual funds or stock markets. The max insurance enabled by DICGC is 1 Lac. If you put 10 lac and the bank winds up, you will get only 1 lac back.
Cooperative banks didn't used to have even this guarantee via DICGC earlier, but have later been covered under the same. But I just don't trust cooperative banks because they have far less and loose regulation and indulge in a lot of shady practices. Even saw it in action as my dad invested a small amount in a cooperative bank long back which later shut down. You can lose your money any time.You should not put any money in cooperative banks unless you are ready to risk losing all of it for the prospect of a 1% better interest rate.
Below should put that in perspective.
https://www.moneylife.in/article/cooperative-banks-outright-loot/51463.html
Almost every month, the Reserve Bank of India (RBI) puts out a brief press release announcing the closure of one cooperative bank or the other. Deposit insurance payment data show that Maharashtra has the highest number of cooperative banks going bust. According to one petition, 165 cooperative banks have been shut down in Maharashtra in the past 30 years. These small banks fail with monotonous regularity because of they are under the dual regulation—that of the RBI and the Registrar of Cooperatives. Cooperative banks are usually set up by politicians or their cohorts and RBI does not bother to block their dodgy advances until it is too late for a rescue. Over the past two decades, the only insurance claims paid out by the Deposit Guarantee Insurance Corporation of India (DGICI), a subsidiary of RBI, are on account of cooperative banks. Their hapless depositors get only Rs1 lakh each paid out after the bank is actually liquidated which can take a few years.
That's 165 cooperative banks shut down in 30 years in just one state.
You should also read about Pratibha Patil's Pratibha Mahila Sahakari Bank which took deposits from poor women and went on a spree of loaning large amounts to her own family members and relatives and then waiving or writing them off. RBI stepped in to cancel its license later, but lots of poor people lost their savings. This bank also collected donations in excess of 4550 crore from its employees wages towards helping Kargil victims, but they pocketed the money themselves. Pratibha Patil was probably the most corrupt person to ever become the president of India.
