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Fixed Deposits: A Secure Investment Option for Steady Returns

Team AckoDec 6, 2023

Fixed Deposits (FDs) are widely regarded as a secure and reliable means of growing your savings. They provide a safe investment avenue for individuals looking for steady returns. With their stability, fixed interest rates, and flexible tenure options, Fixed Deposits in India have earned the trust of millions of investors. Here, we will highlight the various aspects of FDs.




What is a Fixed Deposit?

A Fixed Deposit refers to a financial instrument that can be availed from banks and non-banking financial companies (NBFCs) in India. It allows individuals to deposit a specific amount of money for a predetermined period at a fixed interest rate. The deposited amount earns interest over the specified tenure, and the principal amount remains intact. FDs are considered low-risk investments, making them an attractive option for conservative investors seeking stable returns.

Benefits of investing in Fixed Deposits

Fixed Deposits offer several benefits that make them a popular choice among investors. Here’s a list.

  • Stability and security: FDs provide stability and security for your hard-earned money. They are considered low-risk investments as they offer assured returns and the principal amount remains secure.

  • Fixed returns: One of the main attractions of FDs is the predetermined interest rate. This allows investors to calculate and anticipate their returns accurately.

  • Flexible tenures: FDs offer a range of tenure options, typically ranging from a few months to several years. Investors can choose a tenure that aligns with their financial goals and liquidity requirements.

  • Wide range of options: Both banks and NBFCs offer FDs, providing investors with a wide range of choices. This enables investors to select an institution that suits their preferences and offers competitive interest rates.

  • Loan against Fixed Deposit: In times of urgent financial need, FD holders can avail of loans against their deposit. This feature eliminates the need to break the deposit prematurely and allows individuals to meet their financial obligations without losing out on the interest income.

Eligibility criteria to open a Fixed Deposit account

To open a Fixed Deposit account in India, you need to fulfil certain eligibility criteria. The requirements may vary slightly between banks and NBFCs, but the general criteria include the following. 

  • Age: Most financial institutions require the depositor to be at least 18 years old to open a FD account. Some banks also offer special schemes for minors, with guardianship provisions.

  • Residential status: FD accounts are available for both resident Indians and non-resident Indians (NRIs). Specific schemes may be designed exclusively for NRIs, catering to their unique requirements.

  • KYC compliance: Like any other financial transaction, opening a FD account requires Know Your Customer (KYC) compliance. This involves submitting necessary identification and address proofs, such as Aadhaar card, PAN card, passport, or driving licence.

  • Minimum deposit amount: Each financial institution specifies a minimum deposit amount to open a FD account. The minimum amount can vary, and it is advisable to check with the respective bank or NBFC for their specific requirements.

Types of Fixed Deposits in India

Let's explore the different types of Fixed Deposits available in the Indian market.

1. Regular Fixed Deposits

These are the most common and straightforward types of FDs. They offer a fixed interest rate and a predetermined tenure. Investors can choose the tenure based on their financial goals and liquidity requirements. Regular FDs provide stability and predictable returns.

2. Senior Citizen FDs

These are for people who are sixty years or above. They offer better interest rates when compared to regular FDs.

3. Flexi Fixed Deposits

These provide flexibility to investors by allowing partial withdrawals without breaking the entire deposit. This type of FD is beneficial in emergencies or when there is a need for immediate funds while keeping the remaining deposit intact. Flexi FDs offer convenience and liquidity.

4. Cumulative Fixed Deposits

These are ideal for individuals who want to reinvest the interest earned. In cumulative FDs, the interest is compounded at regular intervals and paid along with the principal amount at maturity. This type of deposit allows investors to maximise their overall returns.

5. Tax-Saving Fixed Deposits

These are an attractive option for investors looking to save on taxes. They feature a lock-in duration of 5 years. Such types of FDs come with tax benefits. 

6. Non-Cumulative Fixed Deposits

These are suitable for investors who require regular income from their investments. In this type of FD, the interest is given at regular intervals; for example, monthly, quarterly, half-yearly, or annually. Non-cumulative FDs provide a steady income stream.

7. NRI Fixed Deposits

These are specifically designed for non-resident Indians (NRIs) to invest their foreign earnings. These deposits offer competitive interest rates and various tenure options. NRI FDs cater to the unique requirements of NRIs and provide them with a safe and reliable investment avenue.

How to open a Fixed Deposit online

Follow these simple steps to open a Fixed Deposit online.

  • Choose a bank: Start by selecting a bank or financial institution that offers online FD services. Look for a reputable institution that provides competitive interest rates and favourable terms.

  • Visit the bank's website: Once you have selected the bank, visit their official website. Navigate to the section for FDs or investments.

  • Explore the options: Browse through the various FD options available on the website. Take note of the interest rates, tenure options, and any additional features or benefits.

  • Calculate interest: Most bank websites provide an online Fixed Deposit calculator. Use this tool to calculate the interest you will earn based on the deposit amount and tenure.

  • Fill in the application form: Locate the online application form for opening a FD. Fill in the required details accurately, including personal information, deposit amount, tenure, and any additional instructions or preferences.

  • Submit the application: Fill and review the application form, review the information to ensure its accuracy. Proceed to submit the form electronically through the bank's website.

  • KYC verification: This typically involves uploading scanned copies of your identity proof, address proof, and passport-sized photographs.

  • Transfer the deposit amount: Once your KYC documents are verified, you will be provided with the necessary details for transferring the deposit amount. This can usually be done through online banking, mobile banking, or NEFT/RTGS transfer.

  • Confirmation and receipt: After the deposit amount is transferred, you will receive a confirmation of your FD along with an e-receipt. The confirmation will include details such as deposit amount, tenure, interest rate, and maturity date.

  • Accessing account information: Upon successful completion of the online Fixed Deposit process, you will be provided with online access to your FD account. 

Check out: FD Calculator

Frequently Asked Questions (FAQs)

Here are some FAQs related to Fixed Deposits in India.


Can I prematurely withdraw my Fixed Deposit?

Yes, most banks and NBFCs allow it. However, this is subject to certain terms and conditions, such as a penalty on the interest earned. It is advisable to check the premature withdrawal policy of your chosen institution before opening a FD account.

Are the returns from Fixed Deposits taxable?

Yes, the interest earned from FDs is taxable under the Income Tax Act of India. The interest income is added to your total income and taxed according to your applicable income tax slab.

What is the difference between cumulative and non-cumulative Fixed Deposits?

In a cumulative FD, the interest earned is reinvested in the deposit, and the total amount is paid at maturity. Non-cumulative ones offer periodic interest payouts (monthly, quarterly, half-yearly, or yearly), providing a regular income stream.

Can NRIs open Fixed Deposit accounts in India?

Yes, NRIs can open FD accounts in India. Many banks offer special FD schemes tailored for NRIs, catering to their unique requirements.

Are Fixed Deposits affected by market fluctuations?

Fixed Deposits are not directly influenced by market fluctuations. The interest rates offered on FDs are determined by the respective institutions and remain fixed for the chosen tenure.

Is it possible to avail a loan against my Fixed Deposit?

Yes, most banks and NBFCs allow you to avail a loan against your FD. The loan amount can range from 70% to 90% of the deposit's value, depending on the institution's policy.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on several secondary sources on the internet, and is subject to changes. Please consult an expert before making related decisions. 


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