A penny saved is a penny earned is surely a proverb have heard many times. If you started earning recently and want to start investing, the multitude of investments available can be mind-boggling.
Among the many options available to you, fixed deposits or FDs stand out for providing assured returns and stability. For an early jobber, this investment is a simple yet low-risk avenue to grow capital. In this article, we’ll read about the basics of fixed deposits to help you determine if they are suitable for you.
What Is A Fixed Deposit?
An FD is a saving avenue where you deposit a lump sum amount with a financial institution (bank or NBFC) for a fixed tenure at a fixed interest rate. As a depositor, you have the option of receiving the interest accrued on a regular basis or as a lumpsum along with the principal deposit once the FD matures.
Are You Eligible?
Residents of India, Non-Resident Indians (NRIs), Hindu Undivided Families (HUFs), partnership firms, companies, trusts, and even minors with guardians or parents can invest in fixed deposits.
Tenure
You can lock your money in fixed deposit for a tenure ranging from seven days, up to 10 years. The interest earned is either credited to the given Savings Account on a monthly, quarterly or annual basis or provided with the principal amount at the time of maturity.
Interest Rate
Interest rates play a crucial role in your FD investment and determine the returns you will get. While large banks typically offer lower interest rates than small banks, the former is more stable and reliable than the latter. There are a few small finance banks (SFBs) which are currently offering returns of around 9%.
Premature Withdrawal
If you need funds urgently, you can opt for a premature withdrawal of your FD. However, a fee of up to 1% may be levied for this.
Taxation
The interest earned from fixed deposits is taxable as per the investor’s income tax slab.
Is Your Money Safe?
Fixed deposits are a low-risk investment option. Moreover, deposits up to Rs.5 lakh in large and small finance banks are protected by the Deposit Insurance and Credit Guarantee Corporation (DICGC) in India.
Fixed deposits are a great option to build an emergency fund and can be easily liquidated in times of need. If you are a first-time investor, assess your risk appetite, financial goals, and the tenure before choosing an FD. Understanding these aspects of FDs is crucial to ensuring the investment is aligned to your financial goals.
Also Read– HDFC Special Fixed Deposit: Deadline extended AGAIN – Details
If you are planning to invest your money for up to three years, here are some FD rates to give you an idea.
| Bank | Interest Rate | ₹1 Lakh in 3 Years |
| State bank Of India | 6.75 | ₹ 122,239 |
| HDFC Bank Ltd. | 7.00 | ₹ 123,144 |
| Canara Bank | 6.80 | ₹ 122,420 |
| Union Bank of India | 6.50 | ₹ 121,341 |
| Punjab National Bank | 7.00 | ₹ 123,144 |
| Bank Of Baroda | 7.25 | ₹ 124,055 |
| ICICI Bank Limited | 7.00 | ₹ 123,144 |
| AXIS Bank Limited | 7.10 | ₹ 123,508 |
| Bank Of India | 6.50 | ₹ 121,341 |
| Indian Bank | 6.25 | ₹ 120,448 |
