Benefits Features of Fixed Deposit in India

Fixed deposits are popular investment options for conservative investors who wish to preserve the capital and earn guaranteed returns thereon. If this sounds like your investor profile, then investing in an FD may be a suitable course of action for you in case you have a lump sum amount at your disposal. Over the period of investment, you will earn assured returns in the form of interest at a predetermined rate on the deposit amount. These assured returns can either be paid out to you periodically, or reinvested in your account and paid out at maturity. You can use a fixed deposit calculator to check how your investment will grow over time. 

Here are some of the key benefits of FD:

• Safety: FDs are one of the safest investment options as they are typically offered by banks and are backed by government insurance up to a certain limit, ensuring the return of your principal amount.

• Guaranteed Returns: FDs offer fixed and guaranteed interest rates, providing predictability in earnings.

• Liquidity: While FDs have a fixed tenure, they are relatively liquid compared to long-term investments like bonds or real estate. Many FDs allow premature withdrawals, although they may come with a penalty.Flexibility of Tenures: FDs typically offer a range of tenure options, from a few days to several years. This flexibility allows you to choose a tenure that aligns with your financial goals, whether short-term or long-term.

• Senior Citizen Benefit: Many banks offer additional interest rates of up to 0.50% to senior citizens on FDs. This can be a significant advantage for retirees looking for secure investment options with better returns.

• Overdraft Facility: Some banks provide the option to take a loan against your FD, known as an overdraft facility. This can be a helpful feature for individuals who need short-term funds but don't want to break their FD prematurely.

• Automatic Renewal Facility: FDs often come with an automatic renewal option, where the principal and interest of the matured FD are reinvested for the same tenure or a different one. This ensures your money continues to earn interest without manual intervention.

Premature Withdrawal Facility: While FDs have a fixed tenure, they usually allow for premature withdrawal in case of urgent financial needs. However, withdrawing before the maturity date may result in a reduced interest rate or a penalty, depending on the bank's policies.