Fixed deposit


A fixed deposit or FD is a specific financial instrument that is offered by banks and NBFC's in India. These offer higher interest rates than regular savings accounts to investors until the prefixed maturity date. Fixed deposits are considered one of the safest investment avenues in India and are term deposits that yield high interest.

Fixed deposits can vary between 12 and 60 months and the interest rates vary as per the duration and type of FD chosen. The biggest benefit offered by FD's is that one is not dependent on market fluctuations when it comes to earning interest. The principal is safely locked in for a particular period and you can keep earning interest on it irrespective of market circumstances. Also, fixed deposits are major assets whereby you can use them to get loans up to a certain amount whenever you are in need of urgent capital.

The interest is earned periodically either through simple or compounded interest on the principal amount that you invest. The interest rates are higher in comparison to savings accounts since the principal amount remains locked for a particular time period.


How to Choose Best Fixed Deposit Plan?

You have two options before you, namely Cumulative Fixed Deposits or Non-Cumulative Fixed Deposits. In case of Cumulative Fixed Deposits, the interest you earn on the principal amount will be compounded annually. This means that you can grow your wealth steadily and get the entire interest income paid out at the time of maturity along with the principal amount. There are no periodic payouts of interest income and this scheme can actually multiply your money in a bigger way if you are disciplined enough and do not need regular interest income payouts.

In case of the non-cumulative FD scheme, the interest you earn on your principal amount will be paid out at regular intervals. This can be on a monthly or quarterly basis or even on a semiannually or yearly basis. Now this scheme is ideal if you need the interest income paid out at periodic intervals. It all depends on your own circumstances and the goals you have from your fixed deposit, i.e. earning regular interest income or simply growing wealth for a specific tenure without any regular income needs.

Apart from choosing between these two types, you should also select the best fixed deposit plan based on other parameters which are the following:

  1. Rates of interest- You should always go for the highest possible rates of interest

  2. Tenure- You should choose flexible tenure as per your convenience

  3. Terms & Conditions- You should always choose a fixed deposit plan where you have convenient interest payouts and keep in mind extra rates for senior citizens among other aspects

  4. Other features- Go for financial institutions which offer you online access to your fixed deposit account along with easy application and payment procedures