Understanding Fixed Deposits- Features, Benefits, Eligibility Criteria

Recently gaining popularity as an entirely safe and secure investment option, fixed deposits are quite popular among budding investors. While opening a fixed deposit is almost a piece of cake, you should still be aware of certain major factors as you opt to open a fixed deposit.

Here’s everything about Fixed deposit- features, benefits, eligibility criteria and the types of fixed deposits.

What is a Fixed Deposit?

FD or a Fixed deposit is known as ‘term deposit’ or ‘time deposit’ is an investment instrument service offered by banks and Non-banking financial companies (NBFC). Being the safest investment instrument out of many others, it allows users to deposit a lump sum amount for a particular time period with the financial institution. In addition to this, FD provides the users with a lot of other features such as-

• You can earn interest on the deposited amount for the pre-decided tenure, as per the rate of interest locked earlier
• The rate of interest once locked remains unaffected by any changes in market or interest rates
• You can earn interest either periodically or at the time of FD maturity
• A fixed deposit amount cannot be pulled before the maturity date and if in case, someone wants to withdraw the amount, he/she is required to pay a penalty for it

Key Features of Fixed Deposits

Listed below are all the features of fixed deposits that you should know before investing in them- 

• The amount for which you want to create a fixed deposit should be decided before creating the deposit. Any additional amount shall be added in a new deposit
• Fixed deposit holders are offered a higher rate of interest in comparison to most investment options
• The returns on deposit never get fluctuated by the market 
• One cannot withdraw money before the maturity date. In case of emergency withdrawal or willful amount withdrawal, one needs to pay the penalty
• Fixed deposits offer guaranteed returns
• The depositor can earn interest monthly, quarterly, annually or after the maturity date
• Fixed deposits have low liquidity as an investment option
• You can renew a Fixed deposit
• There is no cap on the maximum limit of the amount that can be deposited

Read More: List of Documents Required for Fixed Deposits

Benefits of Fixed Deposit

Below are the benefits of a fixed deposit you should be aware of before investing your money-

Safe investment option

FDs are considered one of the safest options available in the market as compared to other investment options. This investment instrument offers a rate of interest that remains unchanged even after the fluctuations in market conditions throughout the pre-decided tenure.

Assured rate of interest

The FD user gets an assured rate of interest against the deposited fixed amount. Banks have the facility of fixed deposit interest calculators on their websites to let users calculate the interest they will receive upon maturity.

Hassle-free investment

Having a savings account allows one to invest in fixed deposits easily by visiting the bank’s branch or online. After the maturity of FD, one can either renew it or get the amount credited to the account.

Read More: Top 5 Differences Between Fixed Deposits and Recurring Deposits

Compound interest

You are eligible to receive compound interest in case you would like to reinvest your FD matured amount. Here, compound interest means that you will earn interest not just on the principal amount but also on the interest earned.

Tax Saving

A major number of banks in India offer tax saving fixed deposit options to their users which result in pulling down the taxable amount to be paid.

Flexible Tenure

Fixed Deposit tenure varies from 7 days to 10 years. Investors can invest in FDs as per their business or personal requirements. If you want to withdraw money after 5 years, you can invest in a tax-saving FD with a 5 year lock period.

Loan against FD

A person can finance himself using the fixed deposit amount instead of paying a higher interest rate by taking an unsecured loan. Loans against fixed deposits have a relatively lesser interest rate as compared to the applicable fixed deposit interest rate. Opting for a loan against a fixed deposit will not require the deposit holder to dissolve his/her fixed deposit.

Types of Fixed Deposits

There are various types of fixed deposits options in the market, by comparing each of them, you can invest rightly in one. Here is a comparison chart of different types of fixed deposit- 

Documents Required for Fixed Deposit

To create a fixed deposit with a bank, you must provide the following documents-

• Photocopy of PAN card, Passport, Voter ID card, or any other Government issued ID card
• Duly filled and signed application form with Passport size photograph
• Residential proof like electricity bill, telephone bill, photocopy of passport
• Original documents for verification

Who can Opt for Fixed Deposit

If you wish to open a fixed deposit in India, you must be either of these-

• Resident of India
• NRI
• Senior citizen
• Minor
• Owner of an individual or a joint venture
• A Society
• Own a sole proprietorship
• Owner of a company

Who Should Invest in Fixed Deposit

It is advised for the following personnel to opt for a fixed deposit as an investment option-

• A person who is not willing to take market risks can invest in fixed deposits
• If someone has taxable income, FD can be a tax saving investment instrument
• A retired person who would like to have a regular source of income can apply for FD schemes
• A user who is a housekeeper and has decent money to invest can compare various FDs and invest in one

How to Find the Right Fixed Deposit

Though there are many measures to find the appropriate FD option to invest in; however, there are a few basic things that one should consider before investing-

• Make sure to compare all the FD options offered by different banks
• Understand whether you want to invest in cumulative FD or non-cumulative FD
• Review the lender’s credibility through the rating given by CRISIL, ICRA
• Finally, look for a bank that offers satisfactory customer service and a smooth onboarding process to open an FD

How to Open an FD account

There are two ways to open your FD account- Online and Offline

Online

To open an FD account online, follow these common steps-

• Login to the bank’s net banking platform
• Visit the fixed deposit section on the portal
• Fill in all the required information and click on ‘Submit’
• In case you are opening an FD account with the existing bank, you will not be asked to do the KYC again as the bank will already have your details
• Alternatively, if you are opening an FD with a new bank, be handy with all the necessary KYC documents and a passport size photograph

Offline 

To open an FD account offline- 

• Visit your bank’s branch and fill the application form along with all the necessary details required
• Once done, submit the form to the concerned official
• Deposit the deposit amount and collect the deposit receipt
• If you are opening an FD account with a new bank, make sure to connect with the official who can guide you through the process. Apart from that, carry all the KYC documents and a passport size photograph for the completion of the FD account process

Fixed Deposits with Paytm

With various banks in the country that offer the facility to create fixed deposits with them, it becomes difficult to choose which bank to move ahead with. Induslnd as its banking partner, Paytm Payments Bank also offers the facility to create fixed deposits with numerous benefits for the users.

Opening a savings account with Paytm is as easy as it sounds. All you need to do is open the Paytm mobile application, click on ‘Paytm Bank’ and follow the instructions to create an account. Within a few minutes, your account will be created.

You’d now think that why should you open a fixed deposit with Paytm. Here’s why!

• Paytm offers an interest rate of 5.5% on regular fixed deposits and 6% on senior citizens FDs, relatively higher than many other banks in the country
• There is no penalty for withdrawing an amount from the fixed deposit before the actual maturity date
• Paytm offers the option of partial withdrawal from the fixed deposits
• Only Rs 100 is required to create a fixed deposit
• Paytm offers the facility of auto-create fixed deposits when the amount in your Paytm savings account exceeds beyond a certain limit as set up by the user
• Fixed deposits with Paytm can be created and/or dissolved at any time, from anywhere and requires only a single click

There shouldn’t be more reasons for you to look any further as you decide to create a fixed deposit for yourself. Paytm fixed deposits have the answer to all your concerns!