For a long time, saving and investments have been associated with opening a Fixed Deposit. This is because this financial instrument is considered safe, has a flexible duration, and provides guaranteed returns over a certain period.
What is it?
A Fixed Deposit is an investment instrument offered by banks and non-banking financial companies to their customers. Through this instrument, you can invest a corpus at a fixed interest rate and for a fixed period. The interest rates are usually different across banks and change periodically. However, the rate is higher than the interest offered by your Savings Account.
FDs also have varying tenures, ranging from seven days to five years and more. Moreover, the interest rates also change according to the duration you choose to invest your money for.
Key Features
Some of the important FD features include the following:
Easy to open
Today, you can enjoy instant opening for your FD from your Banking App. This saves you the hassle of travelling to the bank or standing in long queues to invest your money. It also makes the process convenient, hassle-free, and paperless. Moreover, you can choose the amount and tenure when opening the FD and conveniently manage the deposit later with a few taps. For example, you can add or alter nominee details, manage maturity instructions, terminate the FD, etc.
Get insured
Your FD is insured by DICGC for an amount of up to Rs. 5 lakh.
Flexible tenures
You can invest in an FD for seven days, five years, or more. This lets you time your maturity date based on your financial goals.
Guaranteed returns
The returns that you receive from your Fixed Deposit Account are not influenced by market fluctuations. Hence, they offer guaranteed returns, unlike market-led investments whose returns usually fluctuate over time. Moreover, if the interest rates offered by your bank fall after opening an FD, you continue to receive the same interest that had been decided at the time of its opening. Hence, an FD is regarded safer than investing in assets like equity.
Loans against FDs
In case of an emergency, you can apply for Loans against your FD. Your bank offers you a percentage of your FD amount while the original investment continues to earn interest. Hence, you need not liquidate your FD prematurely and pay a penalty. However, you can still avail of funds when in need.
Earn at intervals
You can choose to get the principal and interest of your FD at maturity. Alternatively, you can opt for an option that deposits the interest amount to your Savings Account frequently. You can choose to receive the payments monthly, quarterly, etc., depending on your needs. Hence, it provides a regular stream of income.