A fixed deposit (FD) is a financial instrument provided by banks or NBFCs to offer investors a higher rate of interest than a regular savings account, until the given maturity date. Money cannot be withdrawn from the FD as compared to a recurring deposit before maturity. Some banks may offer additional services to FD holders like loans against FD certificates at low-interest rates. The longest permissible term for FD deposits is 10 years. Generally, the longer the term of deposit, the higher is the rate of interest FD.
Usually in India the interest on FDs is paid every three months from the date of the deposit. (for e.g. if FD was opened on 15th Mar., first interest installment would be paid on 15 June). The interest is credited to the customers’ Savings bank account or sent to them by cheque. This is a Simple FD. The customer might also choose to have the interest reinvested in their FD account. In this case, the deposit is called the Cumulative FD or compound interest FD. For such deposits, the interest is paid with the invested amount at the end of the complete term.
Benefits of FD
You have worked hard to earn your money. Now, let your money work hard to earn for you. You can avail loan against FDs up to 80 to 90 percent of the value of deposits. The rate of interest on the loan could be 1 to 2 percent over the rate offered on the deposit.
- Residents of India can open FD for a minimum of 7 days
- Investing in a fixed deposit earns you a higher interest rate than depositing your money in a saving account
- Flexible range of tenures to suit customer’s requirement
- Option to withdraw your funds before completion of tenure
- Option to link your FD account with your savings account for easy manage
- Choice of various Fixed Deposit schemes
- Interest payable monthly, quarterly, half yearly, annually or at maturity as per convenience
- Competitive interest rates
- Nomination facility available
- Partial withdrawals are permitted
- Auto Renewal facility
- Special rates for Senior Citizens
- Tax Saver Deposits available
- The convenience of booking deposit through online/ Phone Banking
Best FD Interest Rates in India
Let’s understand some of the investing institutions or banks who offer customer-friendly fixed deposit options for the benefits of the customers:
- 1 year FD rates range from 5.70% to 8.00%. Jana Small Finance Bank, Ujjivan Small Finance Bank have the highest interest rate of 8.00% for a one year fixed deposit.
- 2 year FD rates range from 5.70% to 8.00%. Ujjivan Small Finance Bank has the highest interest rate of 8.00% for 2 year fixed deposit.
- 3 year FD rates range from 5.75% to 7.80%. Equitas Small Finance Bank has the best rate of 7.80% for 3 year fixed deposit.
- 5 year FD rates: Range from 5.50% to 8.00%. Fincare Small Finance Bank has the best rate of 8.00% for 5 year fixed deposit.
Factors that affect FD Rates
Bank FD interest rates vary by the amount deposited, tenure of deposit, and type of depositor.
- Deposit Amount: Banks offer a lower interest rate on bulk deposits of more than Rs 1 crore and high-interest rate on deposits of less than Rs 1 crore.
- Deposit Tenure: Banks offer a lower rate of interest on deposits with a shorter tenure.
- Depositor Type: All banks in India offer higher interest on senior citizens FDs.
Depositors have the option to choose for periodic interest pay-outs and opt for monthly interest on their Fixed Deposit. To calculate the monthly interest amount you can use FD Monthly Interest Calculator
Fixed Deposit Calculator
The fixed deposit calculator can help you calculate the maturity value of the investment if it grows at a specific interest rate.
Tax Saving FD
Tax saver fixed deposit (FD) is a type of fixed deposit, by investing in which, you can get tax deduction under section 80C of the Indian Income Tax Act, 1961. Any investor can claim a deduction of a maximum of Rs. 1. 5 lakh by investing in tax saver fixed deposit.
You can calculate the maturity amount for different rates using FD calculator online and choose the tenure with highest rates.
