Fixed Deposit : A guarantee to earn a profit
Fixed deposit means that you deposit your money in a bank or any other financial institution for a fixed period of time. Fixed deposit offer more interest rates than in regular savings account. In fixed deposits, you are not permitted to withdraw the money before maturity. If you urgently need to withdraw the money, you will have pay some penalty charges for that.
Fixed deposit can be of two types:
- Simple fixed deposit: In this, the interest is regularly transferred to the savings account of the customer or sent to him/her by cheque.
- Compound fixed deposit: In this, the interest is credited back to the fixed deposit itself and the interest is calculated on the total amount then. That is why this is known as compound fixed deposit.
Why to have a fixed deposit:
There are a few reasons why having a fixed deposit can be beneficial for you:
- High interest rate: As compared to other type of saving or investment schemes like a savings account or investing in a stock market, fixed deposit offers better interest rates.
- Guaranteed returns: Unlike investing in a stock market, fixed deposit guarantees return of your money along with a high interest.
- Encourages saving: In fixed deposits you are not allowed to withdraw the money before maturity which builds a habit of saving money in you.
- Flexible: In fixed deposits you can decide the time period for which you want to deposit the money. There is a provision of depositing the money for a period of minimum of 7 days to maximum of 10 years depending on the institution in which you are interested in depositing your money.
- If you are interested you can have more than one fixed deposits as per your requirements.
- Easily withdrawable: Though the banks or financial institutions ask you to pay a penalty for withdrawing money from fixed deposits before maturity, the penalty is just a small amount. In case of emergency you can easily withdraw money from FD’s just by paying a small penalty instead of selling your stocks or bonds.
Eligibility for fixed deposit:
Following entities are allowed to have a fixed deposit:
- Resident Individuals(Non resident Indians or Persons of Indian Origin are not permitted)
- Hindu Undivided Family (HUF)
- Sole Proprietorship
- Partnership Firms
- Companies including group companies
- Club, Association and Society
- Family Trust
Documents required to apply for fixed deposits:
- An introduction by any other bank or an introduction by a respective bank Savings Account holder for the last six months
- Proof of identity like PAN card, Voter’s ID card, Passport, driving license etc.
- Proof of address like electricity bill, telephone/ mobile bill, passports, bank statements etc.
Comparison between various banks:
Before opening a fixed deposit account you should compare what is the minimum or maximum period for which you can deposit the money and also what is the interest rate that you can earn from various banks. Here is a comparison of top banks which provide the facility of opening a fixed deposit account:
|Fixed Deposits with Bank||Tenure||Interest Rates for Regular Deposit|
|Axis Bank||From 7 days to 10 years||3.50% p.a.-7.50% p.a.|
|Bank of Baroda||From 7 days to 10 years||4.50% p.a.-7.30% p.a.|
|Bank of India||From 7 days to 10 years||4.00% p.a.-7.25% p.a.|
|Canara Bank||From 7 days to 10 years||4.00% p.a.-7.50% p.a.|
|HDFC Bank||From 7 days to 10 years||3.50% p.a.-7.25% p.a.|
|ICICI Bank||From 7 days to 10 years||4.00% p.a.-7.50% p.a.|
|Indian Bank||From 7 days to more than 3 years||5.00% p.a.-7.25% p.a.|
|Indian Post Office||From 1 year to 5 years||7.10% p.a.-7.90% p.a.|
|Punjab National Bank||From 7 days to 10 years||4.25% p.a.-7.50% p.a.|
|State Bank of India||From 7 days to 10 years||5.25% p.a.-7.00% p.a.|
We can say that fixed deposits are beneficial when you are actually interested in saving your money and the interest that you earn is like icing on the cake.