Overview of Fixed Deposits: Fixed deposits are an investment option that offers stable interest rates, special rates for elderly citizens, a variety of interest payment methods, no market risk, and income tax benefits. In comparison to a typical savings account, a Fixed Deposit (FD) is a more safe investment choice that pays a greater rate of interest.
Fixed Deposit Interest Rates
In simple terms, fixed deposits are nothing but you are lending some money to the bank and in return, the bank pays interest for you. So these fixed deposit interest rates vary from bank to bank and also the Rates of interest are subject to change at any time. The rate of interest on an FD varies depending on the time period and the amount deposited.
Fixed Deposit Intrest Rates of Top 5 Banks
The top 5 interest rates offered by banks for fixed deposits are given below:
|Bank Name||For General Citizens (p.a.)||For Senior Citizens (p.a)|
|ICICI Bank FD Interest Rate||2.50% to 5.50%||3.00% to 6.30%|
|HDFC Bank FD Interest Rate||2.50% to 5.50%||3.00% to 6.25%|
|State Bank of India FD Interest Rate||2.90% to 5.40%||3.40% to 6.20%|
|Canara Bank FD Interest Rate||2.95% to 5.50%||2.95% to 6.00%|
|Punjab National Bank FD Interest Rate||3.00% to 5.25%||3.50% to 5.75%|
Advantages of Fixed Deposits
One of the safest investing options is fixed deposits. The list of advantages one can avail if he/she opts for Fixed deposits are given below:
- Safety Assurance: Most of the Fixed deposits have been assigned the FAA+/Negative rating by CRISIL and the AA/Stable rating by CARE, indicating a high level of safety. So when you are opting for fixed deposits, make sure you are choosing the FAA+/Negative rating by CRISIL and the AA/Stable rating by CARE for security purposes.
- High FD Interest Rates for Senior Citizens: Senior citizens get a better FD interest rate when compared to individuals.
- Nominations: All fixed deposits have the option of being nominated. In the event of a depositor’s death, the deposit and any interest would be repaid to the nominee, with no regard for the deceased’s heirs or legal representatives.
- Auto-Renewal Process: Few banks offer an auto-renewal option. Where customers can opt for auto-renewal of fixed deposits as well as a simple maturity withdrawal process.
- Premature Withdrawal: Few banks offer premature withdrawal. After three months from the date of deposit, you can make a premature withdrawal from your fixed deposit account. Individuals who make a premature withdrawal within six months of the deposit will be paid an annual interest rate.
- TDS: No TDS is deducted at source on interest earned on fixed deposits up to 5,000 in a fiscal year.
- Loan Facility: Up to 75% of the total principal deposit can be borrowed against fixed deposits. The interest rate on this loan is 2% more than the maximum fixed deposit interest rate. However, this depends from bank to bank.
Factors Affecting Fixed Deposits
The list of factors that affect fixed deposits are given below:
- Deposit Tenure: The shorter the term, the lower the interest rate; the long or medium term, the higher the interest rate.
- Deposit Amount: Higher deposit amounts, particularly bulk deposits above Rs.1 crore, will earn you higher interest rates.
- Depositor Type: Senior citizens often receive 0.25 percent to 0.50 percent more interest on fixed deposits than other depositors.
How To Open a Fixed Deposit Account?
Any individual can simply open a fixed deposit account by simply visiting the bank which offers the option of Fixed Deposits. Also, few banks even provide an online facility where one can create fixed deposit accounts online.
Types of Fixed Deposit Account
The types of fixed deposit accounts are:
- Cumulative Deposit: The interest received on the fixed deposit is credited annually and paid out along with the principle at maturity. It aids in the accumulation of a corpus because interest is compounded annually.
- Non-cumulative Deposit: The depositor receives interest on a regular basis.
Payments can be made monthly, quarterly, half-yearly, or once a year. You can utilise your regular interest payments to cover your daily expenses.
Joint Fixed Deposits
Few banks do have the option of opening fixed deposit accounts jointly. In those cases, banks will allow a joint fixed deposit account with a maximum of three joint holders.
However, only the first listed applicant will be paid the interest on non-cumulative deposits, and their discharge will be binding on the joint holders. Interest is presumed to have accumulated in the name of the first applicant in the case of cumulative deposits. The maturity repayment will be made according to the directions on the FD application form.
Fixed Deposits for Non-Resident Indians (NRIs)
Most banks offer fixed deposit options for NRIs as well. Fixed deposits for NRIs have a maximum term of three years. The depositor’s NRO account will be credited with the repayment of the money as well as any interest received.
Banks accept fixed deposits from NRIs and Persons of Indian Origin on a non-repatriation basis, meaning that the interest and capital received cannot be transferred back to the country of residency or converted to foreign currency, according to RBI regulations. As needed, the tax will be deducted at the source.
FAQ’s on Fixed Deposits
The frequently asked questions on fixed deposits are given below:
Q. How does a fixed deposit work?
A. A Fixed Deposit secures a sum of money for the duration of the deposit. Banks give depositors the option of investing their money for durations ranging from seven days to ten years. The interest rate on a deposit is determined by the length of time the money is kept with the bank. The depositor is not permitted to withdraw funds prior to the deadline. The bank credits the depositor’s bank account with the principal and interest on the maturity date.
Q. Can I get monthly interest on fixed deposit?
A. Yes you can get monthly interest on fixed deposits. For that, you should choose periodic payouts and monthly frequency, you can earn a monthly interest payment.
Q. Is FD a good option?
A. A fixed deposit is a low-risk, low-return investment that is excellent for risk-averse and cautious investors. So, if you’re a cautious investor than, you can obviously go for fixed deposits.