Fixed Deposit (FD) – Features, Advantages, Disadvantages and Interest Rate

What is a Fixed deposit (FD)?

Fixed deposit (FD) is a investment instrument offered by banks and non-banking financial companies, where you can deposit surplus money for a higher rate of interest than savings accounts. You can deposit a lump sum of money in fixed deposits for a specific period, ranging from 7 days to 10 years. Fixed deposit is also known as a term deposit.

Fixed deposit

Some banks may offer additional services to FD holders such as loans against FD certificates at competitive interest rates. Now a days the interest rate varies between 4 and 7.50 percent.

Once the money is invested in FD, it starts earning an interest based on the duration of the deposit. Usually, the defining criteria for FD is that the money cannot be withdrawn before maturity, but you may withdraw them after paying a penalty.

Top Features of Fixed Deposit (FD)

  • Fixed deposits enable investors to earn higher interest on their surplus funds without any risk.
  • You can deposit money in a fixed deposit account only once, but to deposit more money, you need to create another FD account
  • Though liquidity in fixed deposits is lesser, you can look for higher rates of interests, which are higher in case of company fixed deposits
  • Fixed deposits can be easily renewed
  • Tax is deducted at source, from interest on Fixed Deposits as applicable, as per the Income Tax Act, 1961.
  • Bank offers Fixed Deposit in flexible tenures ranging from 7 days to 10 years.
  • Interest income monthly, quarterly or annually available in Fixed Deposit or FD.
  • Partial or full withdrawal facility is available with penalty interest rates in FD.

Advantages of Fixed Deposit (FD) Account

  • Interest rates on FD: Interest rates on FDs are fixed when you open the deposit and the rate depends on the term that you wish to hold it for. he interest rate offered on fixed deposits are higher than that on savings account. It is also a safe form of investment where returns are guaranteed.
  • Secure investment: A fixed deposit offers guaranteed returns. Unlike market-led investments where returns fluctuate over time, the returns on an FD are fixed when you open the account. Even if interest rates fall after you open a fixed deposit, you will continue to receive the interest decided at the start. FDs are considered much safer than investments in other assets like equity.
  • Return on investment: Your return on an FD will depend on the interest rate and the type of deposit you choose. You can opt for a monthly or quarterly pay-out of interest or the reinvestment option, which will give you the benefit of compounding. You can calculate your return of your FD by using Fixed Deposit (FD) Calculator.
  • Flexible Tenures: Bank offers Fixed Deposit in flexible tenures ranging from 7 days to 10 years.
  • Loan against FD: While FDs are fixed for an agreed tenure, you can take a loan against it when you need funds. Banks offer loans against FD in the form of an overdraft, and you can get up to 90% of your FD amount. The benefit is that your FD continues to earn interest, you don’t have to prematurely withdraw your FD, and end up paying a penalty.

Disadvantages of Fixed Deposit (FD) Account

While Fixed Deposits offer various advantages in terms of guaranteed returns, they also have a few disadvantages, including:

  • Low returns: While FD returns are guaranteed, they are also low as compared to other short-term market-linked investments.
  • Liquidity: Withdrawing your FD before the date of maturity leads to a penalty charge. You may also get a lower interest on the total investment when you break your FD.
  • Tax returns: Interest earned through your FD falls under the taxable slab of your income. If your interest earned is higher than Rs.10,000, it will be deducted as TDS at the rate of 10%. For senior citizens, this minimum amount has been raised to Rs.50,000. To increase your tax benefits from FDs, go with tax-saver FDs. Remember though that if you open a joint account, only the first holder of the deposit can avail the tax benefit as per section 80C of the Income Tax Act, 1961.

Fixed Deposit (FD) Interest Rates

FD rates of banks are determined by changes in RBI monetary policy such as repo rate, base rate etc, internal liquidity position of banks, economic conditions and the level of credit demand. FD interest rates of different banks in India vary by deposit amount, deposit tenure and type of depositor.

Comparative FD interest rates in different banks are tabulated below. Here FD rates range are given for different deposit tenure from 7 days – 10 years.

Compare Fixed Deposit Interest Rates in India:

Bank Name TenorsRates For PublicRates for Senior CitizensAs on Date
Bank of Baroda7 - 14 days33.52023-09-20
Bank of Baroda15 - 45 days33.52023-09-20
Bank of Baroda46 - 90 days4.552023-09-20
Bank of Baroda91 - 180 days4.552023-09-20
Bank of Baroda181 - 210 days5.255.752023-09-20
Bank of Baroda211 - 270 days5.756.252023-09-20
Bank of Baroda271 days - <1 year5.756.252023-09-20
Bank of Baroda1 year6.757.252023-09-20
Bank of Baroda1 year - <400 days6.757.252023-09-20
Bank of Baroda400 days - <2 Years6.757.252023-09-20
Bank of Baroda2 Years - <3 Years7.057.552023-09-20
Bank of Baroda3 Years - <5 Years6.507.15 2023-09-20
Bank of Baroda5 Years - <10 Years6.507.502023-09-20
Bank of Baroda> 10 years6.256.752023-09-20
Bank of India7 - 14 days3.003.52023-09-20
Bank of India15 - 30 days3.003.52023-09-20
Bank of India31 - 45 days3.003.52023-09-20
Bank of India46 - 90 days4.5052023-09-20
Bank of India91 - 179 days4.5052023-09-20
Bank of India180 - 269 days5.005.52023-09-20
Bank of India270 days - <1 year5.5062023-09-20
Bank of India1 years - <2 years6.006.52023-09-20
Bank of India2 years - <3 years6.757.252023-09-20
Bank of India3 years - <5 years6.507.252023-09-20
Bank of India5 years - <8 years6.007.252023-09-20
Bank of India8 years - 10 years6.007.252023-09-20
Canara Bank7 - 45 days442023-09-20
Canara Bank46 - 90 days5.255.252023-09-20
Canara Bank91 - 179 days5.55.52023-09-20
Canara Bank180 - 269 days6.256.752023-09-20
Canara Bank270 days - <1 Year6.572023-09-20
Canara Bank1 year only6.97.42023-09-20
Canara Bank1 year - <2 years6.97.42023-09-20
Canara Bank2 years - <3 years6.857.352023-09-20
Canara Bank3 years - <5 years6.87.32023-09-20
Canara Bank5 years - 10 Years6.77.22023-09-20
Central Bank of India7 -14 days3.50%4.00%2023-09-20
Central Bank of India15 - 30 days3.75%4.25%2023-09-20
Central Bank of India31 - 45 days3.75%4.25%2023-09-20
Central Bank of India46 - 59 days4.00%4.50%2023-09-20
Central Bank of India60 - 90 days4.25%4.75%2023-09-20
Central Bank of India91 - 179 days4.50%5.00%2023-09-20
Central Bank of India180 - 270 days5.50%6.00%2023-09-20
Central Bank of India271 - 364 days5.75%6.25%2023-09-20
Central Bank of India1 year - <2 years6.75%7.25%2023-09-20
Central Bank of India2 years - <3 years6.75%7.25%2023-09-20
Central Bank of India3 years - <5 years6.50%7.00%2023-09-20
Central Bank of India5 years - 10 years6.25%6.75%2023-09-20
HDFC Bank7 - 14 days33.52021-11-25
HDFC Bank15 - 29 days33.52021-11-25
HDFC Bank30 - 45 days3.542021-11-25
HDFC Bank46 - 60 days4.552021-11-25
HDFC Bank61 - 90 days4.552021-11-25
HDFC Bank91 days - 6 months4.552021-11-25
HDFC Bank>6 months - 9 months5.756.252021-11-25
HDFC Bank>9 months < 1 Year66.52021-11-25
HDFC Bank1 Year - < 15 months6.67.12021-11-25
HDFC Bank15 months - < 18 months7.17.62021-11-25
HDFC Bank18 months - < 21months77.52021-11-25
HDFC Bank21months - 2 years77.52021-11-25
HDFC Bank>2 years - 5 years77.52021-11-25
HDFC Bank>5 years - 10 years77.752021-11-25
ICICI Bank7 days to 14 days2.532021-11-25
ICICI Bank15 days to 29 days2.532021-11-25
ICICI Bank30 days to 45 days33.52021-11-25
ICICI Bank46 days to 60 days33.52021-11-25
ICICI Bank61 days to 90 days33.52021-11-25
ICICI Bank91 days to 120 days3.542021-11-25
ICICI Bank121 days to 150 days3.542021-11-25
ICICI Bank151 days to 184 days3.542021-11-25
ICICI Bank185 days to 210 days4.44.92021-11-25
ICICI Bank211 days to 270 days4.44.92021-11-25
ICICI Bank271 days to 289 days4.44.92021-11-25
ICICI Bank290 days to less than 1 year4.44.92021-11-25
ICICI Bank1 year to 389 days4.95.42021-11-25
ICICI Bank390 days to < 15 months4.95.42021-11-25
ICICI Bank15 months to < 18 months4.95.42021-11-25
ICICI Bank18 months to 2 years55.52021-11-25
ICICI Bank2 years 1 day to 3 years5.155.652021-11-25
ICICI Bank3 years 1 day to 5 years5.355.852021-11-25
ICICI Bank5 years 1 day to 10 years5.56.32021-11-25
ICICI Bank5 Years (80C FD) – Max to Rs 1.50 lac5.355.852021-11-25
PNB7 to 14 days2.93.42021-11-25
PNB15 to 29days2.93.42021-11-25
PNB30 to 45 days2.93.42021-11-25
PNB46 to 90 days3.253.752021-11-25
PNB91 to 179 days3.84.32021-11-25
PNB180 days to 270 Days4.44.92021-11-25
PNB271 days to less than 1 year4.44.92021-11-25
PNB1 year55.52021-11-25
PNBabove 1 year & upto 2 years55.52021-11-25
PNBabove 2 year & upto 3 years5.15.62021-11-25
PNBabove 3 year & upto 5 years5.255.752021-11-25
PNBabove 5 years & upto 10 years5.255.752021-11-25
Post Office1 year5.55.52021-11-25
Post Office2 years5.55.52021-11-25
Post Office3 years5.55.52021-11-25
Post Office5 years6.76.72021-11-25
SBI7 days to 45 days2.93.42021-11-25
SBI46 days to 179 days3.94.42021-11-25
SBI180 days to 210 days4.44.92021-11-25
SBI211 days to less than 1 year4.44.92021-11-25
SBI1 year to less than 2 year55.52021-11-25
SBI2 years to less than 3 years5.15.62021-11-25
SBI3 years to less than 5 years5.35.82021-11-25
SBI5 years and up to 10 years5.46.22021-11-25
UBI7 – 14 Days33.52021-11-25
UBI15 – 30 Days33.52021-11-25
UBI31 – 45 Days33.52021-11-25
UBI46 – 90 Days3.542021-11-25
UBI91 - 120 Days3.754.252021-11-25
UBI121 to 180 Days4.34.82021-11-25
UBI181 Days to <1 Year4.44.92021-11-25
UBI1 Year55.52021-11-25
UBI>1 Year to 2 Years5.15.62021-11-25
UBI>2 Year to 3 Years5.35.82021-11-25
UBI>3 Years to 5 Years5.45.92021-11-25
UBI>5 Years to 10 Years5.562021-11-25

How to Open a Fixed Deposit Account in Banks?

How to Open a Fixed Deposit Account Offline?

While most bank related work happens online these days, some trips to the bank are absolutely unavoidable. In case you’re stuck without a portal through which to create a bank account online, you can follow these steps to open a Fixed Deposit account in bank offline:

Step 1: Research different banks and their interest rates, find the one that best matches your specific requirements, if any, and the type of bank account you wish to open.

Step 2: Take a copy of your identity proof, two photographs, address proof, income / employment proof (if necessary), and age proof and head to the nearest branch of the bank in which you wish to create an account.

Step 3: Once at the bank, tell the clerk you wish to open a Fixed Deposit account, and he or she will hand you an account opening form.

Step 4: Fill out the form as required, and submit the same along with the copies of your identity proof, photographs, address proof, income / employment proof (if required), and age proof to the clerk.

Step 5: The clerk will then submit the application for processing and, depending on which bank you’ve chosen, your account will be opened and functional in any time between 1 and 12 working days.

How to Open a Fixed Deposit Account Online?

The simplest way to conduct banking operations is online, and opening a Fixed Deposit account is a very simple procedure:

Step 1: Research different banks and their interest rates, find the one that best matches your specific requirements, if any, and the type of bank account you wish to open.

Step 2: Log on to the website of the bank in which you wish to open your account. Note that not all banks have online account creation facilities.

Step 3: Fill out the online application form for the Fixed Deposit that meets your needs and submit it along with a digital copy of identity proof, photographs, address proof, income / employment proof (if required), and age proof. Some banks may require you to submit physical copies of your documents for which they will send over an executive.

Step 4: Your details will be verified by the bank’s back-end team, and you will be able to start using your account almost instantly.

Documents Required to Open a Fixed Deposit Account

When customers decide to open a Fixed Deposit account, the bank requires the customer to submit certain documents. They are as follows:

  • Proof of age and identity:Any authentic, registered, and recognized document issued by a competent authority, that contains the full name and a recent photograph of the applicant can be used. PAN, Voter ID, Passport, and Driving license are some examples of the documents that are accepted by banks when applying for a Fixed Deposit account.
  • Photographs: Most banks require that customers submit at least 2 passport-sized photographs along with their application.
  • Proof of address: Any authentic, registered, and recognized issued by a competent authority, which contains the address of the applicant can be used. Customers should keep either a Driving license, Voter’s ID, Passport, Utility bill are among some of the documents that can be submitted to the bank.
  • Senior Citizen Card: Almost all banks offer Senior Citizen Fixed Deposit accounts to their customers. Applicants who wish to open a senior citizen’s account are required to submit proof of their age. A senior citizen card is issued by the Social Welfare Department and is the document that is most preferred as proof.

Depending on the applicant and the type of account being opened, the bank could ask for a few more proofs of identification, age, address, and employment.

Calculate your return of your FD by using Fixed Deposit (FD) Calculator.

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