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Fixed Deposit (FD): All you need to know

Fixed deposits (FD) are a lump sum deposited in an account for a fixed tenure. They have a higher interest rate than other types of savings accounts and thus provide greater returns to the customer.

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Fixed Deposit

Fixed Deposit (FD) is an excellent savings option that has been popular for many years in India. It is a type of investment in which you are allowed to make a lump sum deposit for a fixed period of time with the bank of your choice. This amount will accumulate interest and at the end of the tenure, the principal amount and interest will be deposited into your savings accounts. The money can only be withdrawn before the maturity date if a penalty amount is paid. FD is one of the safest investment options out there that helps you achieve a steady growth without any risk involved.

FD Calculator

₹
250000 ₹ 5000 ₹ 10000000
12 1 25

Result

Invested Amount (in Rs.)

₹ 2,50,000

Estimated Returns (in Rs.)

₹ 7,03,348

Maturity Amount (in Rs.)

₹ 9,53,348

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Features and Benefits of Fixed Deposit (FD)

1

Easy to Invest

Customers can easily open a fixed deposit online or offline. Net-banking platforms allow the creation of FD accounts in seconds by filling in some basic information. For offline assistance, you only have to walk into the closest branch of the bank and they will create the FD for you. 

2

Higher interest rates

The most attractive feature of a FD is that the interest rates are usually higher than other saving accounts. This allows you to earn higher gains from any idle money that you can wisely invest in a fixed deposit. 

3

Guaranteed returns

Fixed deposit is a safe investment instrument that can be liquidated easily in case of emergencies. There is no market risk associated with the interest rate like that in mutual funds. While interest rates offered by banks may change from time to time, the applicable interest rate for a particular FD will be set at the time of opening the account. The customer is guaranteed to get that set interest against their invested amount. 

4

Flexibility of tenure

You can set the tenure of your deposit according to your financial goals. It can be a short-term investment of a minimum of 7 days or even a long term one for up to 10 years. The longer the tenure, the higher the returns are.

5

Quick loan facility

If you have a fixed deposit with a bank, it is easier to get approved for a loan when you apply for one. 

FD for customers below the age of 60 

The annual rate of interest for fixed deposits for customers below the age of 60 can differ from bank to bank, depending on the amount deposited. For instance, interest rates for amounts less than Rs 2 crore will be lower than interest rates for amounts between Rs 2-5 crore. For any FD above Rs 5 crore, you have to check with the bank.


FD for customers above the age of 60 

Senior citizens can avail a higher interest rate on their fixed deposits. Many banks offer an additional 0.10% to 0.50% above the normal fixed deposit interest rate for senior citizens who book an account for tenure of 5-10 years. The deposit amount also needs to fall within the maximum limit set by the bank. Special interest rates are offered for longer tenures and allow customers above the age of 60 to earn higher gains. However, senior citizen rates do not apply to fixed deposits for NRIs. 

Types of Fixed Deposits (FD)

1

Standard Fixed Deposit

The deposit is made for a fixed period of time and this tenure can be anywhere between 7 days to 10 years. The interest rate is predetermined by the bank. 

2

Tax Savings Fixed Deposit

This type of FD is used for saving tax. It allows a tax exemption of up to Rs. 1.5 lakh per year. Tax saving FDs are locked-in for 5 years and cannot be withdrawn prematurely.

3

Special Fixed Deposit

A special fixed deposit has to be locked-in for a specific period of time as mentioned by the bank. In return, you can earn a higher return than that offered on standard FDs. 

4

Senior Citizen Fixed Deposit

Citizens above the age of 60 years can open this type of FD and are offered between 0.10% to 0.50% higher interests than that on FDs for those below 60 years of age. Senior citizens are also allowed more flexibility in their tenure.

5

Regular Income Fixed Deposit

Citizens with limited monthly income can use the interest from this type of fixed deposit for managing their expenses. Regular income fixed deposits offer monthly or quarterly payouts. 

Eligibility criteria & documents required 

 

To invest in a fixed deposit account in India, the following are eligible:

  • Indian citizen
  • Senior citizen
  • Non-Resident Indian
  • Minor
  • Joint investors
  • Companies
  • Associations, societies or clubs
  • Sole proprietorship firms

The following documents need to be submitted to the bank at the time of opening an FD:

  • Identity proof in the form of Aadhaar card, PAN card, Driving Licence or Voter ID card.
  • Address proof in the form of Electricity bill or Telephone bill.

Step-by-step guide to invest in a Fixed Deposit

 

1. Visit the website of the bank in which you want to start a fixed deposit account.

2. Click on the Fixed Deposit or Open FD on the main page.

3. Once you are directed to the online application form, login with your existing customer ID or create an account. Enter details like birth date, mobile number and PAN card (for investments above Rs 50,000) to validate.

4. Once the phone number is verified, pick the FD account you wish to open.

5. Edit the details like amount and tenure for the deposit.

6. Confirm your application and authenticate with the OTP sent to your registered phone number.

7. Your Fixed Deposit (FD) is created. 

How to renew Fixed Deposit (FD)

Fixed deposits are invested for a specific tenure, at the end of which the deposit matures. In order to renew it, the FD holder needs to set instructions for renewal before the date of maturity. You can do this online or visit the branch and ask them to change the mandate. This cannot be done post the maturity date and the renewal option cannot be cancelled once it is set.

To renew the FD online, log in to the net banking facility and click on the renew option under the fixed deposit account you choose. You can opt for partial or full renewal. The default function will be for full renewal unless you specify partial renewal with the balance amount you don't withdraw. Once you pick the partial or full renewal option, you will be shown the current interest rates per tenure that are offered by the bank during that time. You can check the list and pick the tenure according to your wish. You can then proceed with the updation of the FD and submit as per instructions provided online.

If you wish to get assistance from the bank, you can visit your branch and ask them to help set renewal or auto-renewal options for your FD. 

Reasons to choose Fixed Deposit Reasons to choose Fixed Deposit

FAQs about Fixed Deposits

1 What is meant by Fixed Deposit?

Fixed deposits are a lump sum deposited in an account for a fixed tenure. They have a higher interest rate than other types of savings accounts and thus provide greater returns to the customer. 

2 Which type of FD is best?

The type of fixed deposit best suited for you would depend on your financial situation. If you are looking for long term returns, pick a longer tenure for a standard fixed deposit. For saving on taxes, a tax saving FD is best. For monthly income through interest, you can use a regular income FD or any short-term FD. 

3 What is the maximum amount of investing in a fixed deposit?

There is no maximum limit set for fixed deposits. However, there is a minimum amount that needs to be deposited and this may vary from bank to bank. 

4 How does the FD calculator help in future financial planning?

FD calculators allow you to invest your money in an efficient way depending on your financial goals. They help you to determine the amount and maturity date for your investment. You will be able to pick between a cumulative or non-cumulative fixed deposit and pick the right tenure. A calculator allows you to evaluate between different offers from FD schemes in different banks. 

5 What is the rate of interest?

The rate of interest per annum on principal amount invested in a FD depends on the FD type, tenure and the bank itself. 

6 How do I open a Fixed Deposit Account online?

Log in to the online website of the bank you want to open an FD with. Navigate to the fixed deposit tab and follow the instructions to create an FD account in seconds. 

7 What is the minimum amount to open an FD?

The minimum account for opening an FD varies between depending on the bank and type of account. Most standard fixed deposits need a minimum investment of Rs. 1000. However, a tax-saving FD type of scheme can be started with smaller investments like Rs. 100. 

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