Fixed deposits are the most widely used investment instruments in India. For many years, the term “investing” has been associated with fixed-term deposits (FDs) because this product is regarded as secure, offers guaranteed returns over a period of time, and is also flexible in its duration.
A fixed deposit (FD) is an investment instrument offered by banks and non-banking financial companies (NBFC) to their customers. Individuals invest a predetermined sum of money for a predetermined period of time at a predetermined rate of interest in an FD. The interest rate varies from institution to institution but is generally higher than the interest offered on savings accounts. There are various terms for fixed deposits, ranging from very short-term terms of 7-14 days to long-term terms of 10 years. The following are some types of fixed deposits:
- Normal Fixed Deposit:
These are the conventional fixed deposits that public/private banks and NBFCs offer. The interest rate is fixed, and the lock-in period ranges from seven days to ten years. The FD interest rates generally range between 4% and 7.50% and are typically higher than the interest rate on a savings account.
- Senior Citizen Fixed Deposit:
The senior citizen fixed deposit is usually available to people over the age of 60 years. Generally, a senior citizen fixed deposit interest rate has a higher and better fd interest rates. It offers a higher fixed deposit interest rate than usual, ranging from 0.65% to 0.25%. As a result, it is advantageous to senior citizens and gives them better investment options.
- Cumulative Fixed Deposit:
A cumulative fixed deposit is one in which interest is accrued or accumulated until the maturity date. Interest accrued over the course of a year or cycle is either reinvested or added to the previous investment, thereby increasing the principal. In turn, this increases the level of interest. Here, the full potential of compounding is implemented. When the FD matures, individuals will receive the maturity amount, which is equivalent to the sum of the initial deposit plus earned interest. It is a better option for those who are aware of their immediate financial needs and do not require a regular interest payment.
- Non-Cumulative Fixed Deposit:
Contrary to cumulative FDs, non-cumulative FDs allow periodic interest payments. In this case, the fd interest is paid to the investor at the chosen interest payout frequency. Investors must select the frequency at the time of application. The frequency may be monthly, quarterly, semiannual, or yearly. Due to the fact that investors withdraw the interest amount, the maturity amount will be reduced further if the FD has a higher payout frequency. These FDs are generally ideal for investors who require a regular cash flow and have a lump sum to invest.
- NRE (Non – Residential External) Fixed Deposit:
NRIs (Non-resident Indians) frequently have questions about fixed deposits and whether they are eligible or not. A non-resident Indian can invest in a fixed deposit just like a resident can, but there are a few differences. The NRE fixed deposit is very comparable to a standard FD; instead of using a savings account, individuals can invest in an FD with their NRE account. Individuals can open an online FD account through their online banking account. An NRE FD can, however, only be opened by a Non-Resident Indian (NRE) or a Person of Indian Origin (POI) who has an NRE account. To open an NRE FD, individuals need to provide proof of their address, work visa, and passport.
- Tax-Saving Fixed Deposit:
Many different types of fixed deposit accounts are available to help people save money for the future. With general FD accounts, individuals are free to select the account’s tenure based on their preferences. In addition to standard FD accounts, many banks also offer a five-year tax-saving FD scheme. A tax-saving fixed deposit (FD) account is a type of FD account that provides a tax deduction under Section 80C of the Income Tax Act of 1961. Investing in a tax-saving fixed deposit account allows investors to claim a deduction of up to Rs. 1.5 lakh per year. The features, benefits, and terms associated with this account type may not be identical to those of conventional FD accounts.
In terms of savings, a fixed deposit account has commanded the unwavering confidence of the general public for decades. Investors are generally confident that it is secure and low-risk because it is a bank-based investment product that the RBI closely monitors. However, individuals cannot withdraw prior to the 5-year lock-in period. Individuals must consider and calculate their emergency needs before investing in a tax-saving FD for 5 years.
- Flexi Fixed Deposits:
For a very long time, fixed deposit investments have been one of India’s most popular and traditional forms of savings. One of the primary reasons why people prefer to invest in fixed deposit schemes is that they are one of the safest investment schemes that also offer a good return. Numerous innovative products and investment schemes have been incorporated into India’s banking practices over the years. The Flexi Fixed Deposit is one such product, as it combines the characteristics of fixed deposits and savings accounts. Consequently, a Flexi FD enables depositors to benefit from the liquidity of savings accounts and the higher returns of fixed deposits. As a result, it is a unique type of fixed deposit that Indian banks offer.
Flexi fixed deposits are designed to provide the convenience of flexible terms. The depositor can choose the term according to his or her financial objectives. Flexi fixed deposits generally attract a higher rate of interest than savings accounts, allowing the depositor to accrue a sizable corpus. Opening a Flexi Fixed Deposit account is quick and effortless.
The auto-renewal function expedites and simplifies the process. This indicates that a depositor’s Flexi fixed deposit account is renewed automatically at the end of the policy term.
FD Interest rates in 2022- Regular & Senior Citizen Rates – For Bajaj And Axis Bank
| Fixed Deposit | Tenure | FD Interest Rate | Min. Deposit | Senior Citizen Benefits |
| Bajaj Finance Ltd. | 3Y 8M | 7.50% p.a | Rs. 15,000 | Anyone above the age of 60 is eligible for up to 0.25% p.a. extra. |
| Bajaj Finance Ltd. | 3Y | 7.40% p.a | Rs. 15,000 | Anyone above the age of 60 is eligible for up to 0.25% p.a. extra. |
| Bajaj Finance Ltd. | 2Y 9M | 7.15% p.a | Rs. 15,000 | Anyone above the age of 60 is eligible for up to 0.25% p.a. extra. |
| Bajaj Finance Ltd. | 2Y 6M | 7.05% p.a | Rs. 15,000 | Anyone above the age of 60 is eligible for up to 0.25% p.a. extra. |
| Bajaj Finance Ltd. | 2Y | 6.95% p.a | Rs. 15,000 | Anyone above the age of 60 is eligible for up to 0.25% p.a. extra. |
| Bajaj Finance Ltd. | 1Y 10M | 6.80% p.a | Rs. 15,000 | Anyone above the age of 60 is eligible for up to 0.25% p.a. extra. |
| Bajaj Finance Ltd. | 1Y 6M | 6.65% p.a | Rs. 15,000 | Anyone above the age of 60 is eligible for up to 0.25% p.a. extra. |
| Bajaj Finance Ltd. | 1Y 3M | 6.55% p.a | Rs. 15,000 | Anyone above the age of 60 is eligible for up to 0.25% p.a. extra. |
| Bajaj Finance Ltd. | 1Y | 6.35% p.a | Rs. 15,000 | Anyone above the age of 60 is eligible for up to 0.25% p.a. extra. |
| Axis Bank Ltd. | 1Y 11D | 5.75% p.a. | Rs. 5,000 | Anyone above the age of 60 is eligible for up to 0.75% p.a. extra. |
| Axis Bank Ltd. | 5Y | 5.75% p.a. | Rs. 5,000 | Anyone above the age of 60 is eligible for up to 0.75% p.a. extra. |
| Axis Bank Ltd. | 2Y | 5.70% p.a. | Rs. 5,000 | Anyone above the age of 60 is eligible for up to 0.75% p.a. extra. |
| Axis Bank Ltd. | 3Y | 5.70% p.a. | Rs. 5,000 | Anyone above the age of 60 is eligible for up to 0.75% p.a. extra. |
| Axis Bank Ltd. | 1Y6M | 5.60% p.a. | Rs. 5,000 | Anyone above the age of 60 is eligible for up to 0.75% p.a. extra. |
| Axis Bank Ltd. | 9M | 4.75% p.a. | Rs. 5,000 | Anyone above the age of 60 is eligible for up to 0.75% p.a. extra. |
| Axis Bank Ltd. | 6M | 4.65% p.a. | Rs. 5000 | Anyone above the age of 60 is eligible for up to 0.75% p.a. extra. |
How is an FD calculator useful?
It can be challenging and time-consuming to determine the maturity amount of an FD. An online FD calculator enables the calculation to be performed without effort. Calculations for FD maturity are difficult and involve many variables. With just the click of a button, a fixed deposit calculator does all the work and provides precise figures.
It saves users a great deal of time on these complicated calculations. A fixed deposit return calculator allows individuals to compare the maturity amount and fd interest rate offered by various financial institutions. When investors have access to all the relevant statistics, they can make an informed decision. One can use an FD calculator to determine the interest and total amount that will accrue at maturity.
Benefits Of Using an FD Interest Rate Calculator
- A fixed deposit calculator allows users to compare the various fixed deposits offered by banks. Considering that banks and NBFC FD offer varying interest rates, a comparison will help individuals optimise their investments.
- Individuals can invest in fixed deposits with terms ranging from seven days to ten years. They can adjust the calculator to determine which FD period will allow them to achieve the desired outcome.
- Similarly, individuals can modify the compounding period, or payout period, of the fixed deposit. Due to the fact that the FD provides compounded interest rates, users must determine which compounding period is optimal for their payout period.
- The calculations and analysis can be conducted in two ways, namely by investment amount and target amount. Under the investment amount method, individuals already have a specific investment amount in mind and wish to calculate the maturity and wealth of that investment. Using the target amount approach, individuals conduct their analysis in reverse. Here, individuals are aware of the maturity amount required at the end of the FD’s term and get the amount to be invested as an output.
The Benefits Of Investing In Fixed Deposits
Here are a few benefits of investing in fixed deposits:
- Assured Interest Rate: The fixed rate of interest is one of the main benefits of fixed deposit investments. Once they invest in an FD, individuals are guaranteed to receive the agreed-upon rate of interest from the bank. In addition, banks and NBFCs publish interest rates on fixed deposits on their official websites. Individuals can easily determine the interest rate and invest accordingly with the bank or NBFC that offers the highest rate of interest.
- Loan Facility: In the event of a financial emergency, investors can use their fixed deposit as collateral for a loan. Since a loan against FD is a secured loan, with the FD serving as collateral, the interest rate will be less than that of an unsecured loan. The procedure is straightforward and seamless. Users can sometimes obtain a loan ranging from 90% to 95% of the amount of the fixed deposit. This range varies from bank to bank and NBFC to NBFC.
- The flexibility of tenure: Individuals can invest in a fixed deposit for a specified period of time-based on their financial needs or goals. They can invest for a period of seven days to ten years in days, months, and years. Nonetheless, regardless of whether one holds a bank account or not, one can apply for a fixed-term deposit (FD) at any of the banks. Rather than falling into the trap of premature withdrawals, they should choose the option that best suits them.
- Tax saving benefits: Many banks in India offer tax-saving fixed deposit options to their clients, reducing the taxable amount to be paid. It is recommended that investors contact their bank in order to obtain a comprehensive overview of the tax-saving advantages of FDs.
- Hassle-free: Individuals can easily invest in fixed deposits with a savings account by visiting a bank branch or investing online. After the maturity date of the FD, the funds can be renewed or deposited into the account.
- Compound interest: Customers are permitted to reinvest the matured FD amount for a period of their choosing. In this instance, compound interest signifies that they will earn interest not only on the principal but also on the interest earned.
- Reinvestment: When a customer’s fixed deposit account matures, he or she can instruct the bank to credit the funds or reinvest the funds for another predetermined duration.
- Secure investment option: When compared to other investment options, FDs are considered one of the safest options on the market. This investment instrument offers a fixed rate of interest that does not change with market conditions for the duration of the predetermined tenure.
Premature Withdrawal of FD:
A premature withdrawal of a fixed deposit is the withdrawal of funds from a fixed deposit account prior to the maturity date. Depending on their financial needs, individuals can choose between a partial and a complete withdrawal. Typically, investors choose premature withdrawal if they have an immediate need for funds. Additionally, investors may withdraw funds from a fixed deposit prior to maturity if a better investment option exists.
Premature withdrawal of fixed deposits incurs additional fees imposed by the bank, which constitute a penalty. Generally, the penalty is applied to the rate of interest on fixed deposits. In other words, the actual interest received will be reduced at the time of premature closure. Therefore, the primary purpose of fixed deposits is to discourage frequent withdrawals and promote savings. Investment in FDs yields guaranteed returns in the form of interest at the end of the investment term. As a result, if investors had planned a series of cash outflows using FDs, the early withdrawal of FDs would disrupt the cash flow and the financial goals they had set.
How to book an FD on Kuvera
Step 1: Download the Kuvera app or visit our website and sign up.
Step 2: Complete your KYC with PAN, Aadhaar, and In-person verification through video. It is mandatory to complete KYC compliance under the Prevention of Money Laundering Act, 2002, and the rules framed there under, read with the SEBI Master Circular on Anti Money Laundering (AML) Standards/ Combating the Financing of Terrorism (CFT) /Obligations of Securities Market Intermediaries.
Step 3: Select the ‘Invest’ option from “Home”
Step 4: Select ‘Fixed Deposits’
Step 5: You will see a list of multiple fixed Deposit options on Kuvera, sorted by tenure, bank, NBFC etc. Click on any FD to check its tenure, interest rate, and minimum deposit required. To be sure, check the lock-in period of the fixed deposit.
Step 6: Select the fixed deposit you want to invest in, and tap on “Start FD”.
Step 7: You will be asked to provide your primary bank account details – IFSC code, account number and account type.
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