What Is A Fixed Deposit? What Are Its Types?

Fixed deposit accounts are the best option for risk-averse investors. Over a set length of time, interest is accrued on the sum deposited.

You can handle many FD accounts spread out over different tenures because the tenures are variable. You'll be able to get a better return on your money this way. Senior citizens are entitled to higher rates, ranging from 0.25 percent to 0.65 percent above the current rate.

NRIs (non-resident Indians) can also open NRE (non-resident External) and NRO (non-resident Ordinary) FD accounts in India.

Defined deposits provide both a fixed amount of protection and a consistent income stream. This makes it excellent for people who have a large sum of money that they will not need for a while. It's also a good financial instrument for risk averse people because the rewards aren't susceptible to market risks and have a constant rate of interest.

Advantages of Fixed Deposit

Fixed deposits have a number of benefits, including:

• Senior citizens: When compared to typical clients, senior citizens receive a greater interest rate.
• Increase your fortune by earning interest on your deposits.
• Tenure that can be changed.
• Market risks have no bearing on the returns on your fixed deposits.
• Easy liquidity: If you have an emergency, you can quickly liquidate your FD and get the money you need.
• Regular income: You can have the interest amount credited to your account on a monthly, quarterly, or annual basis, depending on your needs.
• Your deposits are insured up to Rs.1 lakh by the Reserve Bank of India.
• Loan against FD: You can borrow up to 90% of the value of your deposit at very cheap interest rates. This is normally about 2% higher than the FD interest rate.
• Tax advantages: Investing in tax-saving fixed deposits might result in tax savings of up to Rs.1.5 lakh every financial year.

Fixed Deposits Categories

Fixed deposit alternatives are available from Indian banks in a variety of forms. The following are the most popular forms of fixed deposits:

• Fixed Deposits with a Difference

These fixed deposits are referred to as 'special' because they are only available for a limited time. This exceptional term might be as long as 390 days or as short as 290 days. These exceptional fixed deposits give a greater rate of interest. This is why they are such a popular investment option.

• Fixed Deposits (Traditional)

Customers can get this form of fixed deposit from almost all Indian banks. A conventional fixed deposit allows you to invest your money for a set period of time and provides you with a fixed rate of interest that is based on the deposit's term.

• Senior Citizen Fixed Deposit

This fixed deposit is for people over the age of 60. This fixed deposit has the following characteristics: On fixed deposits, senior citizens earn a higher rate of interest. This additional rate could be anything from 0.25 to.50 percent higher than typical FD rates.

• Fixed Deposit, Non-Cumulative

Non-cumulative fixed deposits have the following characteristics:

1. Interest is paid on an annual, half-yearly, quarterly, or monthly basis, according to your preferences.
2. This form of investment is suitable for retirees seeking a steady stream of income.

Bottomline

Despite the numerous investing alternatives accessible in India, most consumers favour fixed deposits. Fixed deposits are popular because of their safety, stability, and consistent increase of your investment money. The bank repays the invested money plus interest at the end of the FD's term. You can choose from a variety of fixed deposit options offered by banks.

Also read: A Detailed Comparison of FD and PPF

Benefits of Investing in PPF

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard