Fixed deposit is a method of investment in which you can deposit your money for a fixed tenure with a Bank or any NBFCs and earn interest on it. Once the FD is mature, you can get the principal amount invested with the interest. You also have a choice to reinvest this money for another term.
The minimum deposit amount varies from bank to bank.
The habit of savings -
Saving is an important aspect of your financial planning and FD teaches you the same by providing interest on your savings. This encourages depositors to save more and deposit more.
Returns are guaranteed -
FDs don't depend on the market fluctuations to provide the respective interest rate along with the principal amount at the end of the deposit tenure.
The tenure of the deposit starts from even 7 days and goes till 10 years (or 20 years for some banks). One can select any tenure which suits his/her needs.
No maintenance -
Once you deposit the money, your job is done. You can now relax and just receive the maturity amount once the FD matures.
FD investments are totally safe and secure as the deposits is insured by Deposit Insurance and Credit Guarantee Corporation (DICGC) with effect from 4 February 2020.
Tax saving -
You can claim for tax deduction under section 80C of up to Rs 1.5 lakhs when you choose tax saver FD with a minimum lock-in period of 5 years.
Highly liquid -
The investment can be liquidated whenever you want.
Yes, if there is an immediate need, you can withdraw the FD amount. This process is called premature withdrawal. However, there is a nominal amount of penalty involved with premature withdrawal by the banks which usually ranges from 0.5 to 1% deduction of interest from the actual rate of interest applicable. Some bank FDs have a minimum lock-in period which means no interest will be paid if you withdraw before that lock-in period.
An FD is a dependable savings instrument to save in case of some financial emergencies. Yes, loans against a fixed deposit are available and are very easy. One can take a loan up to 95% of the fixed deposit amount depending on the bank.
For regular FDs, interest is paid only when the FD matures and is credited to your savings account. However, with different schemes by different banks, the frequency of the interest payout can be selected as monthly, quarterly, or periodically based on the customer’s choice.
The activation of a new FD account is done in a few minutes. Once activated, you can select your preferred FD and book an FD right away.