Get up to 9.40% p.a. interest, inclusive of additional benefit of 0.50% p.a. for senior citizens and 0.10% p.a. for women Open an FD

Fixed Deposits (FDs) can help you save for short-term goals or build a long-term financial cushion. You have the flexibility of choosing from different types of FDs, such as cumulative and non-cumulative, allowing you to align your investment with your financial goals. 

 

FDs provide a reliable way to grow your wealth steadily, ensuring financial stability and peace of mind. Here’s a quick overview of these instruments:

Meaning  

A savings and investment tool that allows you to make a one-time lump sum deposit for a fixed tenor at a specified interest rate for assured returns 

Issuers

Financial institutions including banks and NBFCs

Methods to Open

Can be booked online and offline

Types of FDs

  • Regular Fixed Deposits

  • Senior Citizen Fixed Deposits

  • Special Fixed Deposits

  • Floating Rate Fixed Deposits

  • Callable Fixed Deposits

  • Non-callable Fixed Deposits

  • Bank Fixed Deposits

  • Corporate Fixed Deposits

  • Tax-saving Fixed Deposits

  • Non-cumulative Fixed Deposits

  • Cumulative Fixed Deposits

Certain FDs also permit premature withdrawals, subject to a penalty amount. This gives you access to liquidity to handle unforeseen financial needs. You also get flexible payout options to receive the entire amount at maturity or regular intervals. You could opt for a yearly, half-yearly, quarterly, or monthly interest payout plan

Types of FD in India

Since banks and NBFCs offer various types of fixed deposit plans, you must assess your options to ensure they align with your goals. Here are the different types of fixed deposits you could browse: 

  • Regular Fixed Deposits

These are normal fixed deposits offered by banks and NBFCs. You can invest a lump sum amount with a bank or NBFC for a specific tenor at a fixed interest rate. Upon maturity, you will receive the principal and interest amount earned. These are low-risk investments that make it suitable for different types of financial goals.  

  • Special Fixed Deposits

Certain banks and NBFCs offer special FDs at higher interest rates than usual for a limited period or specific tenor. These function similarly to regular FDs, unless specified otherwise by the financial institution. It primarily helps you benefit from higher rates.  

  • Floating Rate Fixed Deposits

This is a type of FD in which the interest you earn changes based on a specific reference rate. It may be linked to the Treasury Bill yield or RBI’s repo rate. For example, floating rate FDs linked to the repo rate may benefit from hikes in the benchmark rate. However, they are also subject to any dips caused by a lowered repo rate. 

  • Callable Fixed Deposits

Callable FDs are a type of deposit in which banks and NBFCs allow you to withdraw the funds prematurely. This gives you the flexibility to get some liquidity to manage urgent payments. However, it is essential to remember that most banks and NBFCs levy a premature withdrawal penalty for this facility.

  • Non-callable Fixed Deposits

In a non-callable FD, you do not get the facility of withdrawing funds before the maturity of your FD. Most banks and NBFCs offer a higher interest rate for these types of FDs since your funds remain blocked for a certain period. Such FDs may be preferred by investors who do not foresee an immediate need for funds. 

  • Bank Fixed Deposits

Fixed deposits issued by banks can be booked by both new and existing customers. These FDs also come with the benefit of the Deposit Insurance and Credit Guarantee Corporation (DICGC) coverage. This ensures that each depositor in a bank is insured for up to ₹5 Lakhs. 

  • Corporate Fixed Deposits

Corporate FDs are offered by financial institutions and Non-banking Financial Companies (NBFCs). These FDs are usually offered at higher rates than banks. They are rated by credit rating agencies like CRISIL and ICRA, depending on their financial health. A higher rating means that there is a lower risk of defaulted interest payments or bankruptcy.  

  • Tax-saving Fixed Deposits

The principal amount invested in this type of FD is eligible for tax deductions of up to ₹1.5 Lakhs. This is as per Section 80 of the Income Tax Act, 1961. These FDs also have a lock-in period of 5 years. However, the interest earned is taxable. You could opt to receive the interest on a quarterly basis or at maturity, depending on the bank’s policies. 

  • Senior Citizen Fixed Deposits 

These FDs are specifically meant for individuals aged 60 years and above. Banks and NBFCs offer them at higher interest rates compared to regular FDs. The senior citizen FD rates vary across banks and NBFCs with some offering an additional 0.50% p.a. over existing rates. Such FDs may be preferred by retired individuals seeking higher and stable returns on their savings. 

  • Cumulative Fixed Deposits

This type of deposit allows you to benefit from compounding interest throughout the tenor. While you earn interest on the principal investment, it is only payable on the maturity date. Until then, the interest earnings are compounded and added to the principal amount. In the long term, this will lead to a higher interest payout. 

  • Non-cumulative Fixed Deposits 

Non-cumulative FDs payout the interest earned at regular intervals. You can opt to receive the interest returns on a monthly, quarterly, half-yearly, or yearly basis. Depending on the amount invested, the payout may be beneficial for those looking to meet recurring expenses like utility bills, EMIs, etc. Unlike cumulative FDs, the interest here is not compounded and is instead paid out in instalments.  

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Types of Fixed Deposits for NRIs

Here are the various types of fixed deposit options that Non-resident Indians (NRIs) can invest in:

  • Non-resident External (NRE) Fixed Deposits

These FDs give NRIs the flexibility to invest their foreign earnings in India. The funds deposited in NRE FDs are automatically converted into Indian currency. The interest earned and the principal amount are fully repatriable and tax-free. This means, the funds can be transferred back to the foreign country. However, fluctuations in currency rates may affect your investment.

  • Non-resident Ordinary (NRO) Fixed Deposits

NRO FDs are savings tools that allow NRIs to invest their income earned in India, this includes income from rent and pension. The interest earned from such FDs is taxable. Individuals can also repatriate the principal and interest amount up to a certain limit. These FDs come with flexible tenor options and they can be held jointly with other Indian residents or NRIs. 

  • Foreign Currency Non-resident (FCNR) Fixed Deposits

FCNR FDs offer a safe and convenient way for NRIs to save in foreign currency while earning assured returns. The principal and interest earned are tax-exempt in these FDs. However, banks and NBFCs may accept only select currencies, such as US Dollar, Pounds, Sterling, Yen, or Euros. Additionally, the maturity amount is repatriable in the same currency. 

How to Select the Right FD

Here are some factors to consider when browsing the various types of fixed deposits:  

  • Interest Rates

Compare interest rates offered on different types of fixed deposits by financial institutions to ensure maximum returns. If you’re a senior citizen or a women depositor, certain banks and NBFCs may offer preferential rates.  

  • Premature Withdrawal Clause

Check the premature withdrawal policy before investing to ensure you have access to liquidity in case of emergencies. In this case, you could opt for callable FDs since they allow premature withdrawal. 

  • Loan Facility

Check whether the bank or NBFC offers a loan against fixed deposit facility since it could come in handy when you need access to credit to fulfil payments. 

  • Credibility of the Financial Institution 

Assess the credibility of the bank or NBFC as per the ratings assigned by agencies like CRISIL and ICRA. These credit ratings signify the safety of the deposit and the consistency of the financial institution payment history.

  • Tax Exemptions and Tenors

Opt for tax-saver FDs offered by banks to lower your tax liability. However, keep in mind that there is a mandatory 5-year lock-in period. Invest in these FDs if you don’t anticipate an immediate need for funds. 

Compare Fixed Deposit Rates Before Investing

It is crucial to evaluate the rates offered by different banks and NBFCs to ensure you get the best returns. Refer to the following table to know the maximum interest rates that some banks and NBFCs offer in India:

Financial Institution

Rates for Regular Citizens (in p.a.)

Rates for Senior Citizens (in p.a.)

Bajaj Finance Limited

8.40%

8.65%

Mahindra Finance Limited

8.10%

8.35%

AU Small Finance Bank

8.00%

8.50%

PNB Housing Finance Limited

7.75%

7.95%

YES BANK

8.00%

8.50%

Ujjivan Small Finance Bank

8.25%

8.75%

Shriram Finance Limited

8.47%

8.97%

Axis Bank

7.20%

7.70%

HDFC Bank

7.40%

7.90%

Note: The above cumulative FD rates are subject to change at the bank or NBFC’s discretion. These rates are as of 6th August 2024. 

Disclaimer

The information provided by BFDL is related to the rates provided by Banks and Deposit taking NBFCs as available from public domain and under no circumstances is intended to be source of advice or recommendation of any financial investment advice or endorsement of any sort. BFDL disclaims any responsibility or liability regarding inaccuracies, omissions, mistakes etc. as well as offers and use of such 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. Display of any intellectual property along with the related product information does not imply BFDL’s partnership with the owner of the intellectual property of such products and is solely for the purpose of information, unless otherwise provided by BFDL.

Frequently Asked Questions

What is a tenor in FD?

Tenor refers to the length of time during which your invested amount earns interest in an FD account. Most banks and NBFCs offer a maximum tenor of up to 10 years.

Which FD has the highest return?

Cumulative FDs generally offer higher returns since the interest earned is compounded and added to the principal amount throughout the tenor. Individuals aged over 60 years may benefit from additional rates since senior citizen FDs are offered at higher rates than regular FDs.

Which type of account is a fixed deposit?

These are savings tools that generally offer interest rates than savings accounts. You invest funds for a fixed tenor at a predetermined rate.  

Which is best FD or TD?

Fixed Deposits (FDs) and Term Deposits (TDs) are essentially the same, both offering low-risk savings options with fixed interest rates. However, the term 'FD' is more commonly used in India, while 'TD' is often used abroad.

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