Finance: Bank Fixed Deposit

Bank Fixed Deposit

The Finance System - Bank Fixed Deposit

Fixed deposit (FD), is also known as a time deposit or term deposit in the investment sector. It is one option where you can put the excess money for a specific period and with it, you can earn a fixed interest over time. Interest rate depends on your choice of duration or at their maturity. It is a common investment option which gives reliable income and safety for your money. These features also make fixed deposits a good choice for achieving short-term money goals and for saving emergency funds and retirement money.

As more people want safe and profitable investment options, fixed deposits (FDs) are still a popular choice for many investors in India. As of 5th February 2025, more than 20 banks are offering fixed deposit interest rates of 8% or higher.

Operating Method:

You agree to keep your money saved for a set time, and in return, you earn interest on it. Fixed Deposits (FDs) can last from a few months to several years. The interest rates depend on the bank, how long you save, and how much you deposit. You might be able to take your money out before the end date, but there could be a fee. The interest you earn is taxed.

Advantages of Fixed Deposit:

Tax Benefit - A tax benefit upto Rs 1.5 lakh by opening tax-saving FDs.

Loan Against FD - You can use FDs as security for loans or credit cards.

Guaranteed returns: You know how much interest you will earn.

Higher interest rate: FDs give higher interest than saving account.

Safe investment: FDs are a safe choice because they are backed by the bank.

Interest Rates:

Right now, the fixed deposit (FD) interest rates at scheduled banks are between 2.50% and 9.00% per year for regular depositors, depending on how long the money is kept, from 7 days to 10 years. Small Finance Banks and Non-Banking Financial Companies (NBFCs) usually have the highest FD rates. Next are Public Sector Banks and large private banks. However, some Private Sector Banks like DCB Bank, CSB Bank, RBL Bank, IDFC First Bank, IndusInd Bank, and Yes Bank offer better FD rates than other Private Sector Banks.

Highlights :

Lowest Investment: You can start an FD with a minimum deposit amount of Rs 100, but this may differ between banks and NBFCs.

Fixed Time Slab: You can choose to keep your FD for any time between 7 days and 10 years.

Fixed Rate of Interest: The interest rates stay the same until the FD ends or is renewed. Some banks offer floating rate FDs where the rates can change based on an external benchmark. For example, SBI has a Floating Rate Bulk Term Deposit scheme linked to the repo rate.

Multiple Interest Payout Options: You can select how often you want to receive interest payments: monthly, quarterly, every six months, or yearly. You can also choose to reinvest the interest earned to benefit from compounding.

Premature Withdrawal: You can withdraw your money early, but there may be fees for doing so.

Loan against FD: You can take out loans using your FDs while still earning interest on them.

Procedure to Open an FD Account:

You can open a fixed deposit account by online & offline method.
Online account can open with the help of mobile app of the bank like for SBI- YONO SBI, for Union Bank Of India Vyom & with the help of the bank’s net banking platform.
To open a offline fixed deposit account customers must have to visit the bank home branch or any branch near to customer with copy of self attested documents & original one.
Non-Resident also open FD account in India.

List of documents required for opening FD account

Most customers open fixed deposits (FD) at the bank where they already have an account. Since banks already have their customer information, they may not need new documents to open a fixed deposit. However, new customers must provide proof of identity and address, like:

- Aadhaar Card

- PAN Card

- Driver’s License

- Passport, etc.

They also need to provide recent colored passport-sized photos for KYC (Know Your Customer) verification to open an FD account at a new bank.

Who can Open FD Account:

Hindu Undivided Families (HUFs)

Residents

Single Owner Businesses

Partnership Businesses

Limited Companies

Trust Accounts, and more.

To pick the best fixed deposit plan, understand how long you want to invest and how easily you need to access your money. When deciding, compare the current interest rates from different banks and look for options like how interest is paid, special interest plans, and extra features like secured credit cards, loans against fixed deposits, and sweep-in and sweep-out services.

Best FD Rates Compared by Bank Type

When looking at the best rates from different types of banks, small finance banks are the best. Unity Small Finance Bank and NorthEast Small Finance Bank both offer a great rate of 9.00% for fixed deposits.

Private sector banks also have good rates, with Bandhan Bank at 8.05% and RBL Bank at 8.00%.

For those wanting a safe option with good returns, public sector banks are a good choice too, with Bank of Maharashtra at 7.45% and Central Bank of India at 7.50%.

Types of Fixed Deposit

There are different fixed deposit plans for different customers. Here are the types of fixed deposits:

- Standard Fixed Deposit

- Tax-saving Fixed Deposit

- Floating Rate Fixed Deposit

- Flexi Fixed Deposit

- Senior Citizen Fixed Deposit

- Corporate Fixed Deposit

- Cumulative Fixed Deposit

Types of Fixed Deposits for Non-Resident Indians (NRIs):

- NRE (Non-Resident External) Deposits

- NRO (Non-Resident Ordinary) Deposits