What is a Short-term FD?

A short-term fixed deposit (FD) is a financial investment product offered by banks and financial institutions where you deposit a specific amount for a predetermined period. The term "short-term" indicates that the maturity or lock-in period is relatively brief, typically ranging from 7 days to 12 months.


Other than the tenor difference, there are no differentiating factors between a short-term FD and a regular fixed deposit. However, depending on the issuer, the interest rates may differ. 


Investors often use short-term fixed deposits as a conservative investment option to park funds for a short duration while earning a steady, moderate, return on their investment.

Short-term Fixed Deposit Interest Rates

The following table highlights interest rates offered by banks and other financial institutions on short-term FDs:

Financial institution

Regular citizens (p.a.)

Senior citizens (p.a.)

Bank of Baroda

3.00% – 6.75%

3.50% – 7.25%


3.00% – 6.60%

3.50% – 7.10%

Kotak Bank

2.75% – 7.10%

3.25% – 7.60%

SBI Bank

3.00% – 6.80%

3.50% – 7.30%

Bank of India

3.00% – 6.50%

4.50% – 7.25%

Canara Bank

4.00% – 6.85%

4.00% – 7.35%


3.00% – 6.70%

3.50% – 7.20%

Axis Bank

3.00% – 6.70%

3.50% – 7.20%

Disclaimer: The above-mentioned table is not an exhaustive list of all the banks and the interest rates mentioned are subject to change at the issuer’s discretion.

Advantages of Short-term Fixed Deposit

Listed below are some of the key advantages of short-term FDs -

  • Capital Preservation

Low-risk investments, providing a stable and secure way to preserve capital.

  • Liquidity

While there is a fixed tenure for short-term FDs, they are more liquid compared to longer-term deposits.

  • Short-Term Goals

Suitable for investors with short-term financial goals, such as saving for a vacation, upcoming expenses, or a down payment on a major purchase.

  • Interest Payout Options

Depending on the terms of the FD, investors may have the option to receive interest payouts periodically (monthly, quarterly) or at the end of the maturity period.

  • Diversification

While they might not offer high returns compared to riskier investments, they can play a role in balancing the overall risk profile of a portfolio.

  • Overdraft Facility

Loan against FD facility is offered by issuers where you can take a loan of up to 95% of the maturity amount with minimal paperwork.

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Other Short-term Investment Alternatives

If you are looking for alternative investment options, you can consider plenty of other options. Let’s take a look at a few of them.

  • Savings Account

While not a traditional investment, keeping funds in a savings account that offer attractive interest rates can provide liquidity and modest interest earnings.

  • Recurring Deposits (RDs)

Recurring deposits allow investors to deposit a fixed amount every month for a predetermined period, and they earn interest on the cumulative deposit.

  • Short-Term Debt Mutual Funds

Mutual funds that invest in short-term debt securities, such as government bonds and corporate bonds, can be a good option for better returns with relatively lower risk.

  • Treasury Bills (T-Bills)

Issued by the government, T-Bills are short-term securities with maturities ranging from 91 days to 364 days. They are considered low-risk and are available through auctions.

  • Liquid Funds

These are mutual funds that invest in very short-term debt instruments. Liquid funds offer high liquidity and relatively stable returns.

  • Post Office Time Deposits

Similar to FDs, post office time deposits provide a fixed interest rate for a specified tenure.

  • Government Savings

Schemes Individuals looking for regular income and capital protection can consider opting for these schemes. They include the Post Office Monthly Income Scheme (POMIS), Senior Citizens Savings Scheme (SCSS), and the Pradhan Mantri Vaya Vandana Yojana (PMVVY).

  • Flexi Fixed Deposit

A flexi FD is a combination of a fixed deposit and a savings account. It offers higher interest rates than a savings account with the same liquidity. Moreover, you can enjoy benefits like premature withdrawal, auto-renewal, and loan facility.

  • Sweep-in Fixed Deposit

A sweep-in fixed deposit is where the savings account balance in excess of a certain stipulated amount is automatically swept into a fixed deposit account. The interest rates are higher than that of a savings bank account but are often lower than a regular FD.

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The information provided by BFDL herein above is related to the Non-Partnered Banks/ NBFCs and is just for the purpose of information and under no circumstances the information provided hereinabove is intended to be source of advice or recommending any financial investment advice or endorsement of any sort.

The information including interest rates with regard to fixed deposit, provided on this website is gathered through publicly available sources over the internet and is considered as accurate and reliable to the best of our knowledge. BFDL disclaims any responsibility or liability regarding inaccuracies, omissions, mistakes etc. as well as offers by the Non-Partnered Banks. The use of information set out is entirely at the User’s own risk and User should exercise due care prior taking of any decision, on the basis of information mentioned hereinabove. You are advised to visit/ contact the respective Banks/ NBFCs to verify the information before making any investment or opening an account. Further, BFDL does not undertake any responsibility or liability to update this information. YOU ARE SOLELY RESPONSIBLE FOR ANY LIABILITY OR DAMAGE YOU INCUR THROUGH ACCESS TO OR USE OF THE SITE OR SUCH INFORMATION OR MATERIALS EXCEPT WHERE THE LAWS AND REGULATIONS OF A PARTICULAR JURISDICTION CONCERNING WARRANTIES CANNOT BE WAIVED. Additionally, display of any trademarks, tradenames, logo and other subject matters of intellectual property owners. Display of such Intellectual Property along with the related product information does not imply BFDL’s partnership with the owner of the Intellectual Property of such products. 

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Are short-term FDs taxable?

Yes. The interest that you earn from a short-term deposit is taxable at the income tax slab rate applicable to you.

What is the minimum tenor for Short-Term FD?

The minimum tenor for a short-term deposit starts at 7 days.

Can NRIs open a Short-Term FD?

Generally, short-term fixed deposits are only offered to Indian residents. However, a few banks and NBFCs also allow Non-resident Indians (NRIs) to book one.

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