Fixed Deposit or FD is one of the most popular ways of saving money in developing economies like India. It is also considered as a safe investment option which offers good returns and is relatively easy to open. On completion of the pre-decided tenor, your deposit starts earning an interest, throughout the chosen period, as per the interest rate at that you locked in your deposit.
Description of Fixed Deposit
Below are the description of Fixed Deposit (FD):
- In FD, a lump sum amount is deposited in a bank for a fixed duration. This is generally done at an agreed rate of interest.
- At the end of the tenure, the users receive the amount they have invested along with compound interest amount.
- FD is a secure investment that offers good returns. The investment rate does not fluctuate as per the market and the depositor is safe from all kinds of market fluctuations.
Benefits of Fixed Deposit (FD)
Fixed Deposit also offers a number of benefits to the depositors.
- Unlike the investments made in the stock market, fixed deposits are not risk investments and are not dependent on fluctuating market rates. Thus, these can be considered as safe investments.
- Fixed Deposit amount can be withdrawn at any time of emergency requirement. These can be withdrawn at a prior notice also with some penalty.
- Fixed Deposits are flexible in nature. The same can be done for a tenure varying from 1 month to 10 years depending upon the need of the individual.
- FD also provides a better saving option and encourages the users to save small amounts of money which can be used during emergencies in the family.
- FD offers higher rate of interest than saving account and can be open with ease in Post offices and banks.
- FD can also be used for showing 80 C benefits in cases where it is applicable.
Interest Rates on Fixed Deposit
Different banks offer attractive rates on FD which varies as per the banks and the time duration for which this investment is being made.
| Bank | Tenure | Interest Rate (Per Annum) |
| Axis Bank | 7 days to 10 years | 3.50%-7.00% |
| Bank of Baroda | 7 days to 10 years | 4.50%-6.70% |
| Bank of India | 7 days to 10 years | 5.25%-6.35% |
| Canara Bank | 7 days to 10 years | 5.75%-6.20% |
| Central Bank of India | 7 days to 10 years | 4.80%-6.55% |
| HDFC Bank | 7 days to 10 years | 3.50%-6.50% |
| ICICI Bank | 7 days to 10 years | 4.00%-7.00% |
| IDBI Bank | 7 days to 10 years | 6.25% |
| State Bank of India | 7 days to 10 years | 5.75%-6.85% |
| Yes Bank | 7 days to 10 years | 5.00%-7.25% |
Apart from banks some finance companies also offer Fixed Deposit investments to the users. They offer attractive rates on deposits made from a duration varying from one year to three years.
| Name of Company | Fixed Deposit Term | Interest on FD (Regular) | Interest on FD (Senior) |
| Mahindra Finance | Three Years | 7.80 percent per annum | 9.40 percent per annum |
| Sundaram Home Finance | Three Years | 7.25 percent per annum | 7.75 percent per annum |
| HUDCO | Two-Three Years | 7.5 percent per annum | 7.75 percent per annum |
| HUDCO | One Year | 7.5 percent per annum | 7.75 percent per annum |
| Kerala Transport Development Finance Corporation Limited | One Year | 8.25 percent per annum | 7.75 percent per annum |
| LIC Housing Finance Limited | One Year | 7.30 percent per annum | 7.40 percent per annum |
Pros and Cons of Fixed Deposit
No doubt, a fixed deposit is a great way of kick-starting your investment portfolio. However, like any other investment scheme, Fixed Deposit has its distinct pros and cons. However, the advantages of Fixed Deposit generally outweigh their disadvantage which is a big additive of this investment option.
Pros of Investing in Fixed Deposit
The main pros of investing in fixed deposit are:
- The returns from stock market, mutual fund and other debt funds are market-dependent. This is not the case with FD and they provide guaranteed returns.
- FD comes with a minimum deposit tenure of six months to a maximum of 5 years which is a great way of investing.
- Loan against 90% of the FD amount can be taken with relative ease.
- Flexible interest rate payouts are also available in Fixed Deposit which makes it attractive enough for the small investors.
Cons of Investing in Fixed Deposit
The main cons of investing in fixed deposit are:
- The returns in FD are low in comparison to other short term market linked investments.
- When a depositor withdraws the FD prior to maturity, it leads to penalty charges. The depositor will also get a lower interest rate.
- The interest that a person earns through FD also falls under the taxable slab of income.
Fixed Deposit is a great way of saving and earning. Encourage the habit of small savings and secure the future of your family.
Read also: Top 10 Safe Investment Plan with High Return in India
