Benefits of Fixed Deposits (FDs) in India

An FD or Fixed Deposit is a deposit made in a bank for a given period and at a rate of interest which is fixed. FDs as a financial instrument, have consistently delivered good returns after being tested and tried for a substantial amount of period. Additionally, for a person who is investing money for the first time, fixed deposit is a great start.  

• Assured Returns:

There is assured return on investment when the fixed deposit is considered. An FD gives you the required returns after it matures no matter what the market interest rate is at that point of time. The most striking feature of a fixed deposit is that it is unaffected by market fluctuations in the interest rate.  

• Decide Tenure:

Depending on customer’s requirement, the tenure of a fixed deposit is flexible and ranges from 7 days to 10 years. You can choose to have different FDs for various or same tenure in the same or different bank. You will get a separate receipt for every fixed deposit. 

• Generate Extra Profit: When compared to a savings account, the interest rate of a fixed deposit is much higher. The tenure of a fixed deposit affects the interest rate. Usually, the interest rate is higher when the tenure of the investment is long. The interest rate is decided to take into consideration the repo rate. Interest rates of FDs more than five years will be less when compared to interest rates for three years if the repo rate is anticipated to increase. 
• Interest Payment Method: 

Be it quarterly, monthly or yearly basis, customers can choose how frequently they would like to receive the interest amount. For the customer, this will act as another source of income. Additionally, interest will be reinvested into the fixed deposit when a customer chooses a cumulative FD.

• Senior Citizen FD:

Higher interest rates are offered to senior citizens on senior citizen fixed deposits. Hence, many senior citizens opt for this loan after they retire. The rate for FDs is higher as compared to a savings account and also is greater by 0.5% for senior citizens. 

• Fixed Deposit Loan:

Your fixed deposit can be a resource from where you can take a loan in case of an emergency. 90% of the principal amount of the fixed deposit can be borrowed by the customer for a loan. Moreover, the customer will keep earning interest over the fixed deposit that can be used to repay the loan amount.

• Urgent Money Situations:

Money can be withdrawn, and your fixed deposit can be broken in case you need the money.  However, for breaking a fixed deposit, banks charge a small amount as penalty.

• Joint Fixed Deposits:

You can take a joint fixed deposit with your children, spouse or parents. However, both parties will have to give their signatures at the time of premature withdrawal in the application form.

Fixed Deposit Advantages and Disadvantages

Listed above are the benefits of fixed deposits. Fixed deposits have been a trusted source of investment for many people, and till date, they prefer investing in FDs rather than other marketable investments. FDs are more reliable when compared to other market investments. They can also be broken at any time in case of an emergency or a loan can be taken against a fixed deposit. If you have just started your professional career, it is advised to keep a certain sum of money in fixed deposits as it will get you the desired returns after ten years and the interest earned on it could be a boost for your savings too.