Different Types of FDs

Fixed Deposits (FDs) are those financial instruments where you can deposit your funds for a set tenure, and receive returns on the principal amount. As compared to traditional savings accounts, FDs provide higher returns. Apart from being an easy-to-invest option, fixed deposits are among the safest investment options in the market. This is because when compared to other investment options like equity funds, the principal amount of the deposit is not affected by market volatility. If you are risk-averse, and plan to invest your funds in an instrument, which also provides high returns, then FDs are the best option for you. Financial institutions, including banks and Non-Banking Finance Companies (NBFCs) provide the option of investing your money in a FD. You must, however, remember that the FDs offered by companies usually offer higher interest rates.

Before investing your funds in a fixed deposit, you must know the different types of deposits available in the market:

  • Standard/Regular fixed deposits: This is the most common of all FDs. Being a regular and uncomplicated form of investment; you have simply to invest your money for a certain predetermined period, for which a predetermined rate of interest is provided. Usually, you can deposit your amount in a period ranging from one year to five years. On Finserv MARKETS, you can invest as a new customer in the Bajaj Finance FD, and avail an interest rate of 8.60% for cumulative scheme tenors ranging from 36 to 60 months. The key highlights of a standard fixed deposit include the ease and convenience of investment, security of the principal amount, and a high interest rate.

  • Tax-saving fixed deposits: These FDs have a longer tenure of up to 5 years. The key benefit of this type of FD is that you can claim a tax deduction for income up to Rs 1.5 lakh in a given assessment period, under Section 80 C of the Income Tax Act. You must, however, remember that this type of FD comes with a lock-in period, and you cannot break the deposit or withdraw it prematurely.

  • Senior Citizen fixed deposits: This special fixed deposit is for people above 60 years of age. The key highlight of the scheme is that it provides a higher rate of interest as compared to other FDs, thus allowing the elderly to meet a wide range of financial requirements. For example, on Finserv MARKETS, senior citizens can invest in the Bajaj Finance Fixed Deposits, with an interest rate up to 8.95%. Senior citizens can invest in tenures ranging from 12 months to 60 months.

  • Fixed deposits for NRIs: NRIs often consider investing in FDs back home as the investment is an FD is not only safe from market volatility, but also provides a higher rate of interest as compared to the interest from traditional savings accounts. For instance, Bajaj Finance Fixed Deposit for NRIs, available on Finserv MARKETS, provides a slew of benefits like high returns up to 8.95% along with flexible tenor options ranging from 12 months to 36 months. It also provides multi-deposit and easy renewal facilities. As an NRI, you can invest in this FD from your NRO account. Person of Indian origin (PIO) and Overseas Citizen of India (OCI) can also invest in this FD.

  • Cumulative fixed deposits: Cumulative FDs are those types of deposits where the earned interest is only available to you on maturity. You cannot receive the interest amount on regular intervals. The crucial benefit of a cumulative FD is that it has a higher interest rate as compared to non-cumulative FDs. These are best suited for investors who do not need a regular interest payout, but would want more returns on their FDs. You can invest in a cumulative FD, which has a tenor ranging from 12 months to 60 months.

  • Non-cumulative fixed deposits: In the case of non-cumulative FDs, the financial institution pays you the interest earned on the principal amount at regular intervals. On Finserv MARKETS, you can choose the frequency of the interest payout for a non-cumulative FD at the time of application, which can be monthly, quarterly, half-yearly or annually. Here, the tenor for the FD ranges between 12 and 60 months. You must, however, note that the maturity amount decreases if the interest payout frequency is higher. But, the advantage of this FD is that you can receive regular interest payouts, to meet your regular expenses. These FDs are best suited for people like pensioners who need a regular income from interest payouts.

Before investing in these FDs, you must understand the key benefits of this investment. These are:

  • Assured returns: You can receive interest rates of up to 8.95% as per the terms of the policy. This is unlike investments in other funds like debt or equity funds, where there are no guaranteed returns.

  • Easy to open accounts: A fixed deposit account is easy to open. You can open an FD account online in a matter of minutes. It also requires minimum documentation.

  • Higher rate of returns: FDs provide a higher rate of interest when compared to traditional savings accounts or other types of term deposit accounts like recurring deposits.

  • Flexibility: FDs provide you with the flexibility of choosing tenures. You can opt for a tenure ranging from 12 months to 60 months.

  • Minimum investment: Without waiting to accumulate a large corpus, you can easily start investing with a minimum amount of Rs 25,000.

  • Multiple accounts: You can hold multiple FD accounts at the same time without any hassle. This can provide with better returns.

  • Loan on the FD: A loan against any fixed deposit is easy to secure as the fixed deposit is used as collateral for the loan. The maximum amount of loan is generally a certain percentage of the principal deposit. On Finserv MARKETS, you can avail of a loan up to 60% of the amount invested in non-cumulative fixed deposits and 75% of the amount invested in cumulative deposits.

General FAQ

Q. What are the benefits of renewal of an FD?

A. You can avail an additional rate of 0.10% per annum on renewing your fixed deposit. For example, if a senior citizen wants to renew his FD on Finserv MARKETS, then he will receive a total interest rate of 9.05%. This includes the normal rate of 8.60% plus the special category benefit for senior citizens of 0.35% along with the additional rate of 0.10%.

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