What are the Different Types of Fixed Deposits? Which are the Best FD Rates Available in India?

What are the Different Types of Fixed Deposits?
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What are the Different Types of Fixed Deposits: An Overview

While choosing the traditional methods of investment, a fixed deposit type is sure to top your list. Fixed deposits have been a popular investment option for many long-term investors, from the time the investment business gained importance in India. Your forefathers or grandparents, at least once in your life, must have nudged you to park your first savings or first salary in an FD. 

FD is considered to be one of the safest and preferred methods of investing. Specifically for the risk-averse investors. Firstly, you cannot lose your corpus by investing in an FD and also due to assured and steady returns in the future. FD puts you in relaxation mode through a predetermined rate of interest. However, it is of utmost importance for you to select the optimal FD type based on your financial goals and choose the best out of the lot. Let us further explore the types of FD in India and their substantive interest rates in India.

What is a Fixed Deposit?

A fixed deposit or term deposit lets the investors lock in a fixed amount of money, for a fixed period as well as at a fixed rate of interest. As an investor, you can easily open your account with a bank or a financial institution to avail yourself of a required fixed deposit. Different institutions provide varied types of fixed deposits as well as an adaptive rate of interest to their clients. 

It should also be brought to light that fixed deposits come in distinct forms and the majority of the banks offer the topmost preferred type of deposits in India. The other specific feature of fixed deposit is that it has no risk of investment due to being governed by the Reserve Bank of India (RBI). You can choose to open a fixed deposit account either online or offline just by submitting the required form and personal details to your serving bank. Also, the interest on such deposits can be easily calculated through an available online calculator. One thing that the investor however must be aware of is premature withdrawal, this may add to the cost of deposits and wither the returns that one may avail through such deposits.

Types of Fixed Deposits

Let us understand the following types of fixed deposits available in India:

  1. Cumulative Fixed Deposit: In the cumulative type of FD, the interest on your corpus gets compounded based on a predetermined interval. Suh interest is paid at the end of the maturity of your deposit along with the principal amount and not with the currency before such date.
  2. Non-Cumulative Fixed Deposit: This is almost opposite to the cumulative FD, as in such deposits you can avail yourself of the interest on your deposit amount as per your convenience, before the maturity period. This helps you to source a regular income on your deposits. The interest rate, however, in kith cumulative interest and non-cumulative type, is almost the same. 
  3. Standard Fixed Deposit: This is the classic type of FD where the tenure can range from 7 days to 10 years. Such FD is available in almost all types of banks, irrespective of their size or objective. You can avail a loan against such FDs. Such deposits provide you with a standard rate of predetermined interest.
  4. Tax-Saving Deposit: As per section 80C of the Income Tax Act 1961, under the Chapter VI-Deductions, an investor can claim up to 1.5 lakh INR of exemption on such types of deposits in India. You shall have to make a lump sum deposit for a lock-in of 5 years to avail the benefit of such a deposit.
  5. Senior-Citizen Fixed Deposits: As the name suggests, such deposits are available for Indian citizens of age 60 years and above. Such deposits tend to provide a higher rate of interest than regular deposits of up to 0.5%. The tenure of such deposits is flexible and is highly suitable for a safe investment for retired citizens.
  6. Flexi Fixed Deposits: This type of deposit is usually suitable for ones who already have a savings account. Such deposits are to be linked with your savings amount, so that extra savings on your account can be transferred to your FD account. You can choose to create an FD account with an initial deposit as per your convenience and then link it to your savings account.
  7. NRI Fixed Deposits: There are about 2 types of NRI deposits available in India- NRE Fixed Deposits and NRO Fixed Deposits. The NRIs, PIO, etc, can avail such account for a fixed tenure at higher interest rates. Also, it must be noted that the payment on such an account shall be made either through NEFT or RTGS from an NRO bank account.
  8. Corporate Fixed Deposits: These are usually offered by Non-Banking Financial Institutions (NBFCs). Such institutions offer higher rates of interest as compared to mainstream FDs. However, it is vital to choose the right company before investing. You can earn high returns on your investments by checking the CRISIL rating for the company and then making your decision on such an investment.

How to Choose the Right Fixed Deposit?

  • The Rate of Interest: An investor must consider the rate of interest and as well as their viability provided by the financial institutions or banks. Usually, the longer tenure deposits tend to provide a higher rate of interest. Also, it is important to compare the different schemes and their interest rates for making the right decision. 
  • Loan and Overdraft facility: Many FDs offer a loan facility as well as an overdraft facility to their investors. In such a type, you can avail of 90% of your deposit as a loan. So, if you are someone who wants to invest your money for a long period to avail good interest rates but at the same time would like some liquidity to be maintained, such a deposit shall be the right fit for you.
  • Credibility: Most types of FDs are risk-free, however, while choosing FDs such as corporate FDs or any tax-saving deposits, make sure to check the credibility of the company, You must be aware of the credit rating of such deposits before investing your money
  • Withdrawals: If you do not wish to add extra cost to your deposit, you need to understand the withdrawal policies of your desired fixed deposit type. Usually, banks charge between 0.1 % to 0 .75% on premature withdrawals from your fixed deposit account.
  • Tenure of Investment: As an investor, you must be certain of your investment goals and therefore choose the tenure of your investment respectively. Many deposits require a fixed lock-in while some offer a flexible range of tenure, therefore based on your suitability and required period, you may choose to select your fixed deposit type.

Documents Required:

Form 15G/15H, Form 60, and Form 61 are the most commonly used documents required to open a fixed deposit account in India. The list of supporting documents will vary from Bank to Bank. You need to check with your preferred Bank for more details on this. The following are some examples of the various ID proofs that banks accept in India:

  • Voter ID Card (EPIC)
  • Driving License (DL)
  • Passport
  • PAN card
  • Aadhaar Card Ration Card Passbook of any Bank in India

You can also visit your nearest Bank and submit an application form along with these documents to open a fixed deposit account in India.

The list of supporting documents will vary from Bank to Bank. You need to check with your preferred Bank for more details on this. Examples of the various ID proofs that banks in India accept: Voter ID Card (EPIC), Driving License (DL), Passport PAN card Aadhaar Card Ration Card Passbook of any Bank in India.

 Reasons to Invest in Fixed Deposits

  1. Risk Control: Fixed deposits provide you with the safety of your corpus and therefore involve zero risk unless you choose to withdraw your deposit, before the maturity period. These are highly regulated funds by RBI, therefore the risk of fraud and scam stand out of the picture here.
  2. Fixed rate of Interest: The predetermined rate of interest in FD provides you with guaranteed returns on your investment. These may be steady but are sure to provide a capital appreciation on your corpus.
  3. Convenient: These deposits can be made at a click on your screens due to the flexibility of methods for applying for such FDs. With the convenience of online banking, you can open an FD at any time with your required initial deposit. You can also choose to calculate your returns and interest rates through the available calculators within seconds.
  4. Tax-benefit: At the forefront of taxation, FD plays a major role. From senior citizen deposits to tax-saving schemes, this helps to avail deductions on your income and save you from bearing the extra cost of investment. 
  5. Flexibility: Based on your investment objective, you can choose the type of FD you desire to invest in. You can choose a non-cumulative type of deposit to earn regular income on your investments. Also, these provide higher returns than your other traditional accounts such as savings.

Steps to Open a Fixed Deposit Online in India

  • Go to the Bank's website and select the type of FD you want to open.
  • Provide the amount you want to deposit, along with the tenure and name of the account holder (if applicable).
  • Choose a mode of payment for your FD, like online or offline transfer, direct debit from an account held at another bank branch or credit/debit card transaction, etc. - depending on what is available in your area.
  • Enter your details, such as your phone number, email address, etc. - this will be used for communication purposes only!

Once you have submitted and verified your application form, the Bank will send a confirmation email. A few days later, you can withdraw money from your account after all the necessary checks have been done and approved.

Don't hesitate to contact the Bank with any questions regarding your application.

You can also visit their website or call the customer care number to find out what is happening with your application.

When you have opened your FD with a bank, you can make deposits into it by visiting the branch or making an online transfer. You can also use the ATM to withdraw money from your account.

In case you are unsure whether to open a fixed deposit account, ask yourself these questions:

- How much money do I have that I want to save? - What is the best way to save this money? - Will it be safe to leave my money in my bank account instead of putting it elsewhere?

Steps to Open a Fixed Deposit Offline in India

  • Step 1: Fill up the application form
  • Step 2: Submit the form
  • Step 3: Take a copy of your application along with all supporting documents
  • Step 4: Contact your Bank in case you have any queries regarding your FD
  • Step 5: Submit your application form to the Bank
  • Step 6: Get your application form signed by the bank official.
  • Step 7: Take the signed form along with all supporting documents to the Bank's branch
  • Step 8: Once you submit your application, the Bank will ask for some documents such as ID proof and a PAN card.
  • Step 9: Your FD account will be opened if everything is in order. 

Which are the Best FD Rates Available in India?

Let us now compare the major banks that provide different types of FDs in India along with their prescribed interest rates:

Name of BankFor General Citizens (p.a.)For Senior Citizens (p.a)
RBL Bank FD3.25% - 6.65%3.75% - 7.15%
Punjab National Bank FD3.00% - 5.60%3.50% - 6.10%
State Bank of India FD2.90% - 5.50%3.40% to 6.30%
Canara Bank FD2.90% - 5.75%2.90% - 6.25%
HDFC Bank FD2.75% - 5.75%3.25% - 6.50%
IDBI Bank FD2.70% -  5.75%3.20% - 6.50%
Kotak Mahindra Bank FD2.50% - 5.90%3.00% - 6.40%
Axis Bank FD2.50% - 5.75%

2.50% - 6.50%


 

With the flexibility of choosing a suitable type of FD and securing your investment at almost no risk and assured returns, the FDs provide you with a great deal of opportunity. If you are someone who wants to keep away from risk-profiled investments and at the same time would like to bank your money to earn a fixed rate of income, you must explore your options in such different types of FD provided by the major banking institutions in the country.

  • What is the minimum tenure for an FD account?

  • Can I get a monthly interest payout on my FD?

  • What is the minimum amount for an initial deposit in FD?

  • What is a Fixed Deposit?

  • Which type of fixed deposit is best in India?

  • Is FD tax-free in India?

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