A fixed deposit, often known as an FD, is a type of investment offered by financial institutions and quasi financial firms (NBFCs).
A fixed deposit is a sort of commitment in which a specific amount of money is held for a specific period of time. The term of a deposit account, on the other hand, is determined by the individual who invests his money. This period of time might range from a few days to several years. Predetermined deposits provide the depositor a fixed rate of interest in exchange for locking in these money. Fixed deposits are offered by all banks at various rates. A fixed deposit is simple to open and may be done both online and in real life. To determine whether a fixed deposit is the best option, we must consider the benefits and drawbacks of a savings bank account.
- The guaranteed rate of return is one of the main reasons why individuals prefer to invest their money in a fixed deposit. You can just be sure of obtaining the specified rate of return if you put your money into a fixed deposit account.
- A fixed deposit’s term is variable and determined by the depositor. Each branch has its own minimal tenure requirements; nonetheless, the depositor has the last say. It is also possible to choose whether to redeem or extend the fixed deposit for much the same amount of time.
- A fixed deposit is generally simple to discharge. Online-booked FDs can also be liquidated online using e – banking services. A form to liquidate the FD is available at most bank offices.
- Despite the many benefits of fixed deposits, interest rates do not fluctuate in lockstep with inflation. This implies they might receive worse than the rate of inflation in some circumstances. Fixed deposit interest rates have been declining in recent years, reducing the appeal of this investment.
- Banks impose penalties on investors who prematurely remove their fixed deposits. This cost comes in the form of a lower interest rate.
- The interest earned on a savings account is included in the depositor’s income. Any interest generated is not deductible.
After considering the benefits and drawbacks of a fixed deposit account, it is evident that this is a tool for those who do not have a high risk tolerance. This really is the product for you if you prefer to see a steady stream of revenue in your financial institution.