The terms “fixed deposit” and “term deposit” are often used interchangeably, but there are subtle differences. A fixed deposit is a type of term deposit where the interest rate is fixed for the entire tenure. Term deposits, however, can include other instruments such as recurring deposits and may offer floating interest rates. FDs usually have longer lock‑in periods and a guaranteed rate, whereas some term deposits might have variable rates or shorter durations. Both products aim to preserve capital with low risk.
Distinguishing Factors
| Parameter | Fixed Deposit | Term Deposit |
|---|---|---|
| Interest rate | Fixed for the entire tenure | May be fixed or floating depending on product |
| Examples | Bank FDs, tax‑saving FDs | FDs, recurring deposits, flexi deposits |
| Lock‑in period | Typically longer; premature withdrawal allowed with penalty | Can be shorter; certain term deposits allow partial withdrawals |
| Return predictability | High | Varies depending on rate type |
Understanding the distinction helps investors choose products aligned with their liquidity needs and risk tolerance. Even though the names differ, both categories fall under low‑risk deposit instruments.
