Most banks and non-banking financial institutions (NBFCs) provide fixed deposits (FDs) to their clients as a standard financial product. It is also referred to as a "term deposit." Through an FD, customers may invest a certain amount of money for a specific length of time at a specific interest rate. At the conclusion of the predetermined period, you receive your payment plus compound interest.
Depending on how long you have your FD, the interest rate will change. Fixed deposits come in a range of terms, from extremely short ones (7 to 14 days) to very long ones (10 years).
How does it work ?
A fixed deposit might be compared to a bank loan or an NBFC loan. When you make an investment in an FD, the financial institution guarantees that it will both pay interest and refund your money at the end of the term, commonly known as the maturity period. An amount of this interest is given to you. With the addition of interest, the bank may use this capital to lend to further borrowers.
Interest rates are based on the term, or maturity period, of the FD. A 7-day FD will have an annual interest rate that is lower than a 1-year FD. The financial time risk is compensated for. In other words, the value of a rupee now exceeds its value in one year.The reason is because rising costs are a result of inflation. You can get more goods for a rupee today than you can in a year. This necessitates paying an investor.
Features of Fixed Deposit
Here are the some feature of fixed deposit :
It is only necessary to submit the principal once. If you want to add extra deposits, you need to establish a new Fixed deposit.
The interest rate is higher than the interest rate on a savings account.
Seven days to ten years make up the tenure.
Renewals of fixed deposits are simple.
Rarely is withdrawal permitted before the maturity period. Any fees related to an emergency withdrawal are the responsibility of the account holder.
Benefit of Fixed Deposit
Here are the benefit of fixed deposit
Returns that are ensured
In contrast to market-linked instruments, which could lose money owing to market volatility, fixed deposits give a guaranteed rate of return on investments. Compared to savings accounts, FDs provide higher rates and a safer means of wealth protection.
Compounding
You can increase your profits and hasten the growth of your money by investing in FDs because you can earn interest on interest.
Low Minimum Investment
If you want to start investing regularly but need a significant amount of cash to do so, low minimum investment FDs are a great solution. The minimum investment is 500 rupees.
Liquidity
An FD may be withdrawn prior to maturity, but there will be a loss of interest for the elapsed time. The fact that you can, however, liquidate the FD in an emergency gives you the benefit of liquidity.
An easy process
Investing in FDs both offline and online is made simple by net banking or mobile banking.
Types of Fixed Deposit
Here are the types of Fixed Deposit :
Conventional fixed deposit
In a conventional fixed deposit, money is invested for a specific period of time at a specific interest rate. For a period of seven days to ten years, a conventional fixed deposit can be made. The vast majority of interested parties have selected this FD option.
Fixed Deposit Special
Unique Due to the fact that they are typically offered for a short period of time, fixed deposits are regarded as distinctive. Between 290 and 390 days can be included in a given time period. Given that they offer a higher interest rate, special FDs are chosen by many stakeholders.
Deposit Fixed with Tax Savings
Tax-savingTax-saving fixed deposits, unlike conventional fixed deposits, cannot be held for terms less than five years. Although the cash invested is tax-exempt under Section 80C of the Income Tax Act of 1961, the interest earned on the FD is still taxable.
Fixed Deposits That Float
Customers might profit from shifting interest rates in a floating fixed deposit because the rate changes every three months or once a year.
How to open a Fixed Deposit Account ?
Online Process
You can open an FD account online without much difficulty as a shareholder, and you can take advantage of advantages like simple payment, closure, and renewal. The broad processes you can follow to open an FD account online may alter depending on the bank, but they are all the same.
In order to start an online fixed deposit account:
Visit the bank's internet site.
Register a new ID or sign in with your existing one.
Pick 'FD account' from the dropdown.
Include every pertinent piece of information, such as the candidate's duration, the principal amount, etc.
Make sure everything is accurate and send your money.
In order to get a copy of the receipt, download it right away.
Offline Process
Even if you already have an account, you can open a new one with any bank of your choosing. If you want to open an FD account, the process is the same regardless of whether you currently have an account with the bank. Following are the steps:
If you already have an account: The bank branch should receive the completed FD application.
Without an existing account: You must finish your KYC by submitting the FD application form and supporting paperwork that establishes your identity, address, and other facts.
Who should invest in Fixed Deposit ?
FDs are an excellent financial choice for:
Investors who are looking to take on little risk. FDs ensure returns.
Individuals with a short-term goal-oriented mindset. (FDs have less volatility)
People who wish to balance the risk in their investment portfolio. (FDs offset the risks associated with products tied to the market, such as mutual funds.)
Those in their retirement years seeking for a reliable source of income
