All About Bank FD: Features and Benefits

Fixed deposits are the financial provisions that are offered by the NBFC or banks. You can deposit some amount of money that yields a higher interest rate. In the comparison of the savings account, FD interest rates are a bit higher and the best personal finance options. In FDs, the deposits can be made for some specific time period ranging from 7 days to 10 years.

Once you make a deposit in an FD, it starts earning interest depending on the deposit duration. As a rule of bank FDs, the money can be withdrawn before maturity. However, if someone withdraws money before maturity the banks may charge some extra penalty.

FD is considered a good option for personal finance and we are going to enlist here advantages and features of bank FDs in the next section.

Benefits/Features of Bank FD:

To make sure that whether you should invest in bank FDs as a personal finance option or not you should know its benefits. The benefits of features of FD will help you to make a well-informed decision.

i) Fix Return or Interest

Fixed deposits can give a guaranteed return on investment. When you will open an FD then the return will be mentioned and you will get the same at the time of maturity. You get the same fixed FD interest rate that is agreed upon at the time of investment. This makes the fixed deposit safer and more secure as a personal finance option.

ii) Flexible Tenure

Most of the banks offer FDs with flexible tenure. This tenure can be from 5 to 10 years or somewhat or some days/months/years more or less. You can select the tenure at the time of investment. This is a fixed tenure that may not be changed with time.

iii) Loan Against FD

Fixed deposits can also help you with additional fund requirements with personal finance. In case you need some additional or extra funds and your bank FD is not matured, then you can apply for the loan.  You can continuously earn interest on your deposit. Most NBFCs allow the depositors to take 90% of the deposited amount to take as a loan.

iv) Tax Benefits

Any FD as a personal finance option can be of 5 years tenure that can be a tax-saver as well. Under section 80C of the Income Tax Act 1961, you can save your tax up to 1.5 lakhs. FD funds can be deposited for a fixed time period that can again work as some tax benefit instrument.

v) Assured Returns

Bank FDs are one of the most popular and safe deposit instruments due to assured return. Once you will invest in a fixed deposit as personal finance you will surely get a guaranteed return. The return is usually based on the FD interest rate that is not affected by market fluctuation. Therefore the returns are not affected by the ups and downs in the market.

vi) One-Time Deposit

If you deposit once in the FD then you can rest assured that your fund is safe. You can invest a lump sum amount one time as personal finance and then just watch your money grow. The money can grow in the desired time — you need not deposit repeatedly. Just by the one-time investment, you can get the expected return.

Types of Fixed Deposits

As we explained above fixed deposits can be started with any bank or financial institute. But still, while choosing FD as the deposit instrument you may look for the type of FD that you have chosen. Here are the types of bank FDs:

i) Standard Fixed Deposit

Standard fixed deposits can be opened with any bank or personal finance institution. However, you should have a saving account with the institute to start FD. The investment can be made for a fixed time period or a predetermined time period. The FD interest rate is usually pre-specified. The duration of standard FDs can range from 7 days to 10 years.

ii) Corporate Fixed Deposit

When the FD investment is made with any private company or NBFC, then it is known as corporate FD. It usually offers a higher interest rate in comparison to standard bank FDs. However, you should check the credit rating of the company before starting your FD. ICRA rating helps the user in determining whether it is safe or not to invest with the company.

iii) Cumulative Fixed Deposit

Just like any regular fixed deposit any cumulative FD account may require you to deposit money for a predetermined period. You may not receive the regular payout but on maturity, you will definitely receive a fixed amount. If you are looking for long-term investment then cumulative FDs can be the best option for you.

iv) Tax-Saving Fixed Deposit

As its name convey. Tax-saving deposits are available almost with all banks and NBFCs. It can be used to save tax or for tax exemption up to 1.5 lakh per year. However, the minimum lock-in period for these investments is 5 years. During the lock-in period, you cannot withdraw any amount or funds. Such FDs are used many times to save the tax as well.

v) Senior Citizen Fixed Deposit

Senior citizen FDs have several additional advantages. Anyone above 60 years of age can use these FDs. The interest rate on these FDs is higher than normal FDs. Usually, there is an additional 0.50% interest rate on senior citizen FDs. Long-term investment, it’s a good investment option for senior citizens.

vi) Non-Cumulative Fixed Deposits

Investors with monthly goals can choose these types of bank FDs. If the investors have some loan and want to accomplish their EMI goals then this can be the best option. For the non-cumulative FDs, you can choose monthly/quarterly or annual pay-outs and enjoy an interest rate to pay off the bills.

Conclusion

The fixed deposit is one of the safest investment options. FDs or fixed deposits can give you an even higher rate of interest than saving bank accounts. will always depend on the choice of bank or NBFC(Non-Banking financial company). You can check the rate and make informed decisions for investment. To get more information on investment read Piramal’s blogs.