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What is a Short-Term FD?

A short-term fixed deposit is one of the best short-term investment options offered by banks and Non-Banking Financial Companies (NBFCs). For an FD to be classified as a short-term deposit, the tenor must be between 7 days and 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 financial institution, the short-term FD rates of interest may differ. 


Moreover, a short-term FD enables you to enjoy higher interest rates than a savings account offers. That’s not all. You can also choose to avail of a loan against the deposit to meet your urgent fund requirements.  

Short-Term Deposit Interest Rates

The following table presents a range of the best interest rates that you can enjoy by investing in an FD:

Some of the Best Short-Term Fixed Deposits:

Interest Rates for General Citizens:

Interest Rates for Senior Citizens:

Bank of Baroda

2.80% – 4.90%

3.30% – 5.40%


2.50% – 4.90%

3.00% – 5.40%

Kotak Bank

2.90% – 4.40%

3.00% – 4.90%

SBI Bank

2.90% – 4.40%

3.40% – 4.90%

Bank of India

3.25% – 4.75%

3.75% – 5.25%

Canara Bank

2.95% – 5.20%

2.95% – 5.70%


2.50% – 4.90%

3.00% – 5.40%

Axis Bank

2.50% – 5.15%

2.50% – 5.80%

Components of a Short-Term FD

As an investor, it is crucial for you to be aware of the various components of a short-term fixed deposit. Here’s a quick overview. 

1. Tenor

A short-term deposit usually has a tenor that starts from 7 days and goes up to 12 months. 

2. Short-Term FD Interest Rates

The interest rates of short-term FDs tend to be lower than fixed deposits with longer tenors. However, they’re generally higher than what savings bank accounts offer. Also, senior citizens are usually offered an additional interest rate over and above the base rate.  

3. Amount of Investment 

Depending on the financial institution, the minimum amount of investment that you would need to make may differ. In the case of public sector banks, you can start a short-term FD with just ₹1,000 and around ₹5,000 for private banks.

short term fd

Features of a Short-Term FD

Renewal Facility

Many financial institutions allow you to renew the deposit upon maturity. Some even offer an automatic renewal feature as well. 

Premature Withdrawal Facility

Almost all financial institutions allow you to withdraw your deposit even before the expiry of the tenor. However, a penalty is levied when you opt for this feature. 

Nomination Facility

With short-term FDs, you can assign a nominee at any point in time during the tenor and not just during the time of creation. 

Tax on Interest

The interest you gain from a short-term deposit is taxable. The tax rate corresponds to the rate applicable to you based on your income tax slab.

Advantages of Short-Term Fixed Deposit

Investing in a short-term FD has its own set of advantages. Listed below are a few of the key benefits that you stand to enjoy by investing in one. 

  • Short-term deposits are an ideal investment option if you’re looking to park your funds safely for a brief period of time.

  • Thanks to the nomination facility, claiming the deposit, in the event of the death of the investor, becomes easy. 

  • Although there’s a penalty for premature withdrawal, it is usually very low. Generally, the penalty is around 1% of the applicable short-term fixed deposit interest rates.

  • Short-term fixed deposits can be held as collateral to avail of a loan or to avail margin facility from a stock broker. 

  • Depending on the financial institution, you can avail of a loan up to 95% of the maturity amount of the short-term FD with minimal paperwork.

Eligibility Criteria and Documentation for a Short-Term FD

The eligibility criteria to invest in a short-term FD may vary depending on the financial institution. That said, here’s a quick look at the basic criteria you must meet. 

  • In the case of short-term fixed deposits with banks, you might need to first open a savings account. 

  • You must be a resident Indian to open a short-term FD. However, there are a few banks that also allow Non-resident Indians (NRIs) to book an FD as well. 

To book a short-term fixed deposit, you will have to submit a list of documents. Check out what they are below. 

  • A duly filled and signed FD account opening application 

  • Identity proof: PAN, Aadhaar Card, passport, driving license, or voter’s ID 

  • Address proof: Aadhaar Card, driving license, passport, or latest utility bills 

  • A passport-size photograph

How to open a short-term FD account

The process you would have to follow to book a short-term FD is very easy. All you need to do is visit a bank or NBFC branch where you prefer to open an FD account.


Fill out and submit the FD application form along with all the necessary documentation. Note that some issuers may require you to open a savings account before a short-term deposit account.


Alternatively, you can also open an FD account online. All you would need to do is visit the website of the Bank or the NBFC. Then, fill out and submit an online application along with the list of documents required. 

Some Other Short-Term Investment Options

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

1. Bank Fixed Deposit

Bank fixed deposits are similar to short-term fixed deposits. The only difference between the two is that bank FD tenors start from 7 days and go up to 10 years. 

Also, bank fixed deposits are insured to the tune of ₹5 lakhs by the Deposit Insurance and Credit Guarantee Corporation (DICGC). 

2. Post Office Time Deposit

The Post Office Time Deposits are also great investment tools. Since the government of India guarantees these deposits, they are very safe and carry almost zero investment risk.


Their tenors are flexible and range from 1 year to 5 years. In the case of a 5-year PO Time Deposit, you also get to enjoy tax benefits to the tune of ₹1.5 Lakhs under Section 80C.

3. Recurring Deposits

If you prefer to invest small amounts over a period of time instead of a lump sum amount, a recurring deposit may just be the perfect investment option for you.


One of the many advantages of an RD is that it has a very low minimum investment amount. You can start an RD by investing as low as ₹100 per month with tenor ranges between 3 months and 10 years.

4. Flexi Fixed Deposit

In simple words, a flexi FD is a combination of an FD and a savings account. It offers higher interest rates than a savings account with the same liquidity as you enjoy in a savings bank account.


Moreover, like regular FDs, you can enjoy benefits like premature withdrawal, auto-renewal, and loan facility with a Flexi FD account.

5. Sweep-in Fixed Deposit

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 of a sweep-in FD are higher than what a savings bank account offers 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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FAQs About Short-Term Fixed Deposits

Yes. A short-term fixed deposit is one of the best short-term investment options. You get to enjoy advantages like high safety and stable returns.


Additionally, it offers attractive short-term deposit interest rates, the ability to avail of a loan, and a premature withdrawal facility.


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


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


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.


The choice between a short-term FD and a long-term FD primarily depends on your financial goals and the tenor you wish to stay invested in.


For instance, if your goal is to only stay invested for less than 12 months, opting for a short-term FD may be the better option. If you wish to save up for your child’s education, which requires you to invest for a long time, the latter would be the better option.

The tenor for a short-term FD generally ranges from a week to a year. As such, an investment of 5 months would qualify as a short-term FD.


Many banks, including Bank of Baroda, ICICI Bank, HDFC Bank, etc., provide the best short-term FD.


The tenor for a short-term FD generally ranges from a week to a year. As such, an investment of 3 months would qualify as a short-term FD.

The best bank for a 3-month FD would depend on various factors such as interest rates, fees, terms and conditions, and overall financial goals. Many banks, including Bank of Baroda, ICICI Bank, HDFC Bank, etc., provide attractive short-term FDs.

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