What is a Term Deposit?

Term Deposits are Fixed Deposit schemes wherein the investor’s money is deposited for a certain term and is allowed to be withdrawn only after the term ends. Term Deposits are schemes with short term maturity ranging from one month to five years.

Features of Term Deposit

  • Flexibility – Term Deposits at Finserv MARKETS can be started for a tenure of 12 months to 60 months.
  • Assured Returns – Term Deposits give you assured returns. Bajaj Finance FD assures
  • Pre-set Lock-in Period – One of the best features is that you can manage and plan your finances better as you already know the lock-in period before you invest. You can withdraw early, if there is an emergency but this will come with a penalty on the interest that you earn.
  • Low Risk, High Returns – Term Deposits are popular as they offer high returns with low deposits.

Types of Term Deposit

  1. Cumulative and Non-Cumulative deposits: Cumulative term deposit is an option provided for investors who don’t need regular monetary income from the deposit. Hence, the interest earned is reinvested into the deposit and paid out as a lump sum at the end of the tenor. A non-cumulative term deposit is for investors who are looking for a regular interest payout. With a non-cumulative term deposit, the interest will be credited in the investor’s account at regular intervals – monthly, quarterly or yearly.
  2. Sweep-in facility term deposit: Sweep-in is a feature that financial institutions provide where the individual can set an upper limit on their savings account. Any amount higher than that limit will be converted into a term deposit. If the savings account faces a deficit then the funds will be withdrawn from the term deposit with a loss of interest only on the funds swept in. Sweep-in term deposits usually provide a higher interest rate.
  3. Short-term and Long-term deposits: These term deposits have been classified based on the holding period of the investment. A short term deposit has a lock-in period ranging from 1 to 12 months. Short term deposits are ideal for investors looking for quick returns. Long term deposits have a lock-in period ranging from 1 to 10 years. These deposits provide a higher interest rate than the short term deposits.
  4. Senior Citizen term deposits: An individual over the age of 60 years is considered a senior citizen. Most banks or financial institutions provide a higher interest rate on senior citizen FDs or Term Deposits. Senior citizens are also eligible for tax-saving term deposits at some banks.
  5. Special deposit schemes for children: There are a few special deposit scheme aimed at the welfare of children. ‘Sukanya Samriddhi Account’ launched by the government aims at improving the financial stability of girl children above the age of 10 years. Different banks have different schemes focussed on the financial welfare of children e.g., ‘Sishu Mangal’ deposit scheme by Allahabad Bank, Balika Shiksha Scheme by Punjab National Bank etc.
  6. Post Office Time Deposit: Post offices also provide certain financial services. One such service is the Post Office Term Deposit. It can either be opened as an individual or joint account. One can transfer their post office term deposit accounts from one post office to another or own multiple accounts in the same post office. Any deposit scheme which is longer than 5 years is eligible for the tax benefits prescribed under Section 80C of the Income Tax Act, 1961.
  7. Tax-saver term deposits: Tax-saver deposits are eligible for a tax deduction of up to Rs 1.5 lakh under Section 80C of the Income Tax Act. These tax saver term deposits have a lock-in period of 5 years and any   income above Rs 40,000 is taxable. The usual interest rates range between 5.5%-7.75%

Advantages & Disadvantages of Term Deposit

Assured rate of return:

This is the biggest advantage of Fixed Deposits. It guarantees you an assured rate of return. Upon investing your funds in an FD scheme, you can be guaranteed of receiving a high rate of return.

Flexible tenure:

Term Deposit FD offer flexible tenure for investors. It’s also possible to decide whether to redeem the term Fixed Deposit scheme or to extend it for the same period of time.

Easy liquidation:

It is extremely easy to liquidate a Fixed Deposit. For FDs booked online, they can be liquidated online via net banking as well. Otherwise, most bank branches have a form to liquidate the FD.

Loans against Fixed Deposit:

Availing a loan against a Fixed Deposit is very easy. You can easily take a loan up to 95% of the Fixed Deposit amount depending on the financial organisation.

Disadvantages of Fixed Deposit

Reducing interest rates:

Despite lots of advantages, the interest rates of FD do not move in line with inflation. The interest rates for Fixed Deposits have reduced in recent times which has reduced the attractiveness of this investment.

Locked in funds:

Term Fixed Deposit schemes keep your investments locked for a certain duration. These funds are not available for you to use unless you decide to withdraw your funds prematurely.

Penalties on withdrawal:

A lot of financial organisations and Banks charge a heavy penalty to the depositors who withdraw their Fixed Deposits prematurely.

Fixed interest rate:

The Fixed Deposit interest rate remains the same for the entire duration of the Fixed Deposit. Even if the rates increase, the bank does not pay additional interest to the deposit holder.

Term Deposit Interest Rates

The investors are more likely to purchase term deposits when the term deposit interest rates rise since the increased cost of borrowing makes savings more attractive. Likewise, when the interest rates start decreasing, consumers are encouraged to borrow and spend more, thereby stimulating the economy. In a low interest rate environment, demand for term deposits can decrease since investors can typically find alternative investment options that pay a higher rate of interest. You can use the Bajaj Finance Fixed Deposit calculator to calculate the exact amount of maturity that you would get at the end of your term.

FD Rates offered by Finserv MARKETS

For information on the best Bajaj Finance FD Rates offered, please refer to the tables below:

  • For New Customers

Tenor in months

Minimum deposit (in Rs.)

Cumulative

Non-Cumulative

Monthly

Quarterly

Half Yearly

Annual

12 – 23

25,000

6.15%

5.98%

6.01%

6.06%

6.15%

24 – 35

6.60%

6.41%

6.44%

6.49%

6.60%

36 - 60

7.00%

6.79%

6.82%

6.88%

7.00%

  • For Senior Citizens

Tenor in months

Minimum deposit (in Rs.)

Cumulative

Non-Cumulative

Monthly

Quarterly

Half Yearly

Annual

12 – 23

25,000

6.40%

6.22%

6.25%

6.30%

6.40%

24 – 35

6.85%

6.64%

6.68%

6.74%

6.85%

36 - 60

7.25%

7.02%

7.06%

7.12%

7.25%

  • For Online Customers

Tenor in months

Minimum deposit (in Rs.)

Cumulative

Non-Cumulative

Monthly

Quarterly

Half Yearly

Annual

12 – 23

25,000

6.25%

6.08%

6.11%

6.16%

6.25%

24 – 35

6.70%

6.50%

6.54%

6.59%

6.70%

36 - 60

7.10%

6.88%

6.92%

6.98%

7.10%

Annual rate of interest valid for deposits up to Rs. 5 crore (w.e.f 2nd Nov 2020)

FAQs

  • ✔️Is the Term Deposit & Fixed Deposit same?

    No, there is no difference between a term deposit and a fixed deposit. Both are one and the same. Most bankers tend to use the word term deposit.

  • ✔️How is Term Deposit Interest rate calculated?

    The formula to calculate the FD returns is, A=P(1+r/n)^n*t. Here, A is the maturity amount, P is the principal amount invested in the FD, r is the rate of interest and n is the tenure.

  • ✔️How does Term Deposit Work?

    A term deposit locks your amount for an agreed time period (the “term”) – that means you don’t have access to your money until the term finishes. At the end of the term, you’ll get a guaranteed rate of interest for the term you select.

  • ✔️Can you withdraw money from the Term Deposit Account before Maturity?

    Yes, you can but this will incur a certain penalty from selected organisations and banks. There is no penalty to withdraw money from your Bajaj Finance Fixed Deposit prematurely.

  • ✔️Do I need to pay tax on Term Deposit?

    Interest income from Fixed Deposits is fully taxable. You can add it to your total income and get taxed at slab rates applicable to your total income. You can then see it under the head ‘Income from Other Sources’ in your Income Tax Return.

    Foreclosure charges : No additional charges though customer has to be pay the interest applicable on the outstanding amount

    Disbursal Time: 5 days

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