Everything You Need To know About Fixed Deposit (FD) !!!

A fixed deposit ( FD) is a bank-provided financial instrument that provides borrowers with a higher interest rate than a normal savings account until the due date. They may or may not allow a separate account to be established. This is known in Canada , Australia , New Zealand, and the US as a term deposit or time deposit, and in the United Kingdom and India as bond. They are considered very secure investments. Term deposits in India and Pakistan are used to describe a broader investment class, with varying liquidity rates.

The key criterion for a fixed deposit is that before maturity, the money can not be withdrawn from the FD as opposed to a revolving deposit or demand deposit. Some banks may offer additional services to holders of FDs such as loans at competitive interest rates against FD certificates. It's important to note that under uncertain economic conditions banks can offer lower interest rates. The rate of interest ranges from 4 to 11 per cent. An FD's tenure may range from 7, 15 or 45 days to 1.5 years, and may be as high as 10 years. Such assets are better than Post Office Schemes, as the Deposit Insurance and Credit Guarantee Corporation (DICGC) protects them. DICGC guarantees however amount to Rs 1,00,000 per bank depositor. They also offer the advantages of income tax and property tax. Each bank or financial institution that offers fixed deposits sets its own rate of deposit. The interest rates can change from time to time. FD interest varies with the quantity that is invested, depending on the time frame. Most banks are providing higher interest rates to senior citizens (0.5 per cent more). Maturity Value means the balance payable to the consumer at the end of the fixed deposit period, subject to deduction as necessary of any tax.

Premature closure of FD

Just because you need money or you want to reinvest at higher rates, fixed deposit may be closed before the FD's original term. If the Fixed Deposit is closed before the original deposit term is finished, interest will be paid at the rate applied on the deposit date, for the duration during which the deposit was with the Bank. In the event of early withdrawal the deposit may be subject to a penal interest rate as prescribed by the Bank on the date of deposit

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How to open a FD?

You can open a fixed deposit through internet banking, phone banking, or walk into the branch with a check in a bank branch where you have a saving account. You may also open a fixed deposit account at any bank without opening a saving bank account, even though some banks often demand that you open the saving bank account too. If you open via Internet Banking, you receive FD receipt. If Fixed Deposit Receipt is not issued it may be made available on request to the customer.

On Maturity of FD

After your FD has reached maturity, you can walk into any branch of the bank across the country and claim your deposit by furnishing your Fixed Deposit Receipt / Deposit Memorandum. Unless you have a savings account and have not opted for auto-renewal otherwise the money will be paid into your saving bank account. Auto renewal allows automatic renewal of the FD for the same time as the initial deposit.

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