Financial institutions such as banks, NBFCs, and corporates offer fixed deposits (FDs). They are popular financial products through which people can deposit an amount for a fixed period at a stipulated interest rate. A bank FD offers a higher interest rate than an ordinary savings account. At the end of the deposit term, the investor gets back the principal plus the interest that has compounded over the period. FDs are considered safe investment products and therefore ideal for any person who intends to secure his/her savings while earning a fixed income. Small wonder FD interest rates are conversation starters among conservative, risk-averse Indian investors. Let us learn more about fixed deposit rates.
What is a fixed deposit?
Fixed deposits are among the most popular means of saving money in India. They are easy to open, offer assured returns, and are safe. Some money is placed in the FD, and a fixed rate of interest is set when the account is opened. Bank FD holders can decide how they would want to receive their interest: monthly, quarterly, half-yearly, or yearly. FD interest rates can vary depending on the repo rates set by the Reserve Bank of India.
Fixed deposit calculator
Using the online FD calculator, anyone seeking to invest in FDs can easily understand the maturity value of the investment. One just needs to key in the investment amount, the interest rate, and the term period.
Fixed deposit interest rates in 2024
FD interest rates vary depending on various factors such as inflation, the state of the economy, and the Reserve Bank of India’s monetary policy. It would be interesting to learn about the latest FD rates before you think about investing in FDs. For regular depositors, scheduled banks in India currently pay FD interest rates ranging from 3.50% to 7.00%. The tenures can range from 7 days to 10 years. Post-office deposits pay slightly more, in the range of 6.90% to 7.50% for tenures ranging from 12 months to 120 months.
Comparison of fixed deposit interest rates in India
In India, interest rates on FDs differ depending on the bank/financial institution and the duration of the fixed deposit. Private sector banks may offer slightly higher interest rates, which are approximately 5.5% to 8% annually, while public sector banks offer a rate between 3.50% p.a to 7.00% p.a. Corporate fixed deposits offered by companies could fetch up to 9.40%, but are considered riskier than FDs offered by banks. Generally, senior citizens may receive an extra interest of 0.25% to 0.75% more than regular depositors.
FD interest rates–Tax-saving FD
Risk-averse income tax-payers who want to save on taxes prefer tax-saving FD accounts, which have a lock-in period of five years. Such deposits qualify for tax deductions under Section 80C of the Income Tax Act.
FD interest rates–Leading foreign banks
It would be interesting to check out the latest FD rates offered by foreign banks that operate in India. Prominent international banks normally provide interest rates ranging from 4% to 6.5% annually. Though rates are not attractive, these banks are a dependable choice for cautious investors due to their stability and solid worldwide reputation.
Fixed deposit rate – Company/corporate
The interest rates are between 7 % and 9.5% annually. Currently, corporate or business FDs offer better interest rates than normal bank FDs. However, they are a higher-risk investment than bank FDs as their returns depend on the financial standing of the company issuing them.
Fixed Deposit Rates – Senior Citizens
Senior citizens depend on income from fixed deposits to meet their living expenses. Banks and non-bank financial institutions (NBFCs) are mandated to provide a slightly higher FD interest rate for senior citizens. They can choose to receive payments—on a monthly, quarterly, half-yearly, or yearly basis. A depositor may also opt for the cumulative FD where he or she can invest the interest component till the maturity period of the FD.
Types of fixed deposits
FDs allow you to earn interest on the deposited amount for a certain period. The rate of interest charged on cumulative fixed deposits is decided by the bank depending on the period of the deposit and is calculated at quarterly rests for term deposits. The fixed deposit rates offered by financial institutions with normal features are referred to as regular fixed deposits.
There is the flexibility of disbursing the interest periodically on the frequency depending on the details of the plan usually on a monthly, quarterly, half-year, or annual basis. Among all the available options, Tax Saver Fixed Deposits are perfect for investing to minimize tax-related expenses.
Types of FDs for Non-Resident Indians (NRIs)
Non-resident Indians support the Indian economy as they send money back home. The remittances are readily spent and trigger economic activity in the country. FDs for NRIs are specifically tailored to meet the unique financial needs and goals of the community. The best foreign earnings account with tax-free interest and full repatriability is an NRE FD account.
The best option for investing money generated in India with taxable interest is an NRO FD account. The FCNR (B) FD Account offers protection against variations in exchange rates and is appropriate for holding foreign currency deposits.
Benefits of fixed deposits
Fixed deposits (FD) offer several benefits. Fixed deposit rates are predetermined and are not decided by market forces. Thus, FDs are ideal for conservative investors because they carry very low risks. Its duration — from several months to many years — depends on their current position. For the guarantee of regular income, investors can also choose to get interest payments quarterly or upon the expiry of the investment.
Features of Fixed Deposits (FD)
FDs offered by banks and other financial institutions are popular financial products that allow people to invest a sum of money for a specific period at a specific rate of interest. The credit is repaid at the term of the option, which makes it a relatively safe investment decision since the principal amount is not placed at risk to earn the interest. As for FDs, you can decide on the duration with some flexibility—it spans from 7 days to 10 years. Interest is usually compounded or paid out periodically and is generally higher than those of normal savings accounts.
Eligibility Criteria – Fixed Deposit
All Indian citizens are eligible to open a bank FD account in India. They include Resident Indian nationals, non-resident Indians (NRIs), Hindu Undivided Families (HUF), clubs, society, partnership firms, associations, sole proprietary concerns, companies, trust, and government agencies. A bank, however, may set restrictions such as minimum age and minimum balance for operating FDs for children.
Documents required to open a fixed deposit
Documents such as government-issued ID cards, address proof documents, and passport-sized photographs are required to open an FD account. Aadhaar card, PAN Card, utility bill, or a driver’s license are acceptable IDs for opening an FD account. For instance, senior citizens may be required to provide proof of age to avail higher FD interest rates. Lastly, ensure that all these documents are self-attested.
How to open an FD online?
Most banks and financial institutions allow you to open FDs with a few clicks from the comfort of your home. You can upload your identity documents online, pay the FD amount through net banking, and download your FD receipt online. The maturity amount will be credited to the account from where you made the FD deposit. Online FDs make the whole process so easy.
How to open a fixed deposit offline?
To open a fixed deposit account offline, you need to go to the branch of the bank or any other financial institution of your choice. Complete the fixed deposit application form, hand over passport-size photographs, identity proof, and address proof, and deposit the cash amount. Once the bank receives the money, you will get a fixed deposit receipt from the bank, which has details of the deposit such as the amount deposited, interest rate, date of maturity, and the maturity amount.
How to choose the right fixed deposit?
Choosing the appropriate Fixed Deposit (FD) requires consideration of several factors. It begins with comparing interest rates offered by different banks and financial institutions. Examine the duration of the FD that best suits your financial objectives. Check the validity of the financial institution and ensure that the deposit is covered by insurance. Evaluate flexibility options for early withdrawal and check the latest FD rates in the market.
Why invest in fixed deposits?
Among risk-free investment options in the market, FD is considered the best.
Guaranteed returns on investment
FDs are a reliable investment option since customers know exactly the interest they will accrue. FDs provide a specific rate of interest which means investors will get the amount of interest at the end of the maturity period.
Capital protection
The safety of bank FDs is one of its attractive features. Capital protection is guaranteed, and investors will receive the capital along with interest accrued.
Tax deduction under Section 80C
Under 80C of the Income Tax Act, taxpayers can claim exemption from taxes if they invest in tax-saving fixed deposits that generally have a five-year lock-in period.
Loan against fixed deposit
FDs also function as a source of funds. If you need cash, you need not break the FD. You can take a loan against your FD to meet your financial commitment.
Credit card against fixed deposit
Some banks offer credit cards that are secured with fixed deposits. If one uses it like a credit card, and the FD serves as security, this could be useful for those who want to establish or raise their credit score.
FAQs
1. Why should I invest in FD?
Ans: Fixed Deposits (FDs) provide guaranteed returns on investment in a secure environment. They are perfect for conservative investors since they offer stability in the form of interest income, protection from market swings, and financial security.
2. How do I choose a fixed deposit?
Ans: When selecting a fixed deposit, evaluate the bank’s reputation, duration, and interest rates. To optimize returns, take into account variables like lending facilities against the FD, flexibility, and penalties for early withdrawal.
3. Who can invest in an FD scheme in India?
Ans: Depending on the rules of the particular bank or financial institution, individuals, Hindu Undivided Families (HUFs), minors (with guardians), elderly people, and non-resident Indians (NRIs) can invest in fixed deposit schemes in India.
4. What are the minimum and maximum terms of fixed deposit schemes?
Ans: Fixed deposit schemes usually have durations ranging from 7 days to 10 years.
5. How will I receive the FD maturity amount?
Ans: The full amount of the FD, interest included, is credited to your associated bank account at maturity. Certain financial institutions could provide the choice of receiving the maturity amount as a demand draft or check.
Conclusion
For the risk-averse investor, a bank FD is the perfect investment tool as it is safe and secure. FDs are suitable for individuals who like to save money and get a steady income since the product assures fixed interest rates for a defined period. Still, the returns are not very attractive compared to other investment options such as stocks or mutual funds. Yet, conservative investors prefer FDs due to the stability and safety offered by these products.
