Fixed Deposit (FD)

A fixed deposit is an investment option that allows you to invest a certain amount of funds for a fixed period at a fixed interest rate. This is one of the trustworthy investment options available in the market today and offers potential returns compared to a savings account. FDs help achieve your financial goals, like creating a safety fund for an emergency, saving for your child's college expenses, or preparing for your retirement. This article aims to explain everything you need to know about a fixed deposit (FD).

FD calculator

A fixed deposit calculator is an online tool that is free and enables you to plan an investment by calculating the maturity value and interest earnings on your fixed deposit. You get an idea of potential returns by giving basic details like the amount invested, tenure, and the rate of interest applicable. Additionally, you can compare different plans with the help of a calculator.

Features and Benefits of Fixed Deposit (FD)

FD deposits offer various features and benefits to fulfil different needs and requirements of the investor. Offering competitive interest rates, flexible terms, and the benefit of compounding interest, fixed deposits ensure that your savings grow steadily and consistently over time. The following are the various features of FD:
 

• Competitive interest rates:
  Through FD, you can earn potential returns on your investment with interest rates that significantly exceed those offered by regular savings accounts, ensuring optimal growth of your capital.

• Flexible tenure options:
  FD allows you to choose from a wide range of investment periods, typically ranging from 12 to 60 months, allowing you to align your FD with your specific financial timeline and objectives.

• Minimum investment:
  You can start your investment journey with as little as ₹5,000, with the flexibility to invest in multiples of ₹1,000, making FDs accessible to investors across all income levels.

Additional benefits for senior citizens and women

Senior citizens receive preferential interest rates with an additional benefit, while women depositors also qualify for enhanced rates.
 

• Choice of payout options:

  You can select between two options. In cumulative schemes, interest compounds until maturity for maximum growth. While non-cumulative schemes provide regular income through monthly, quarterly, half-yearly, or yearly interest payouts to meet ongoing financial requirements.

• Digital investment convenience:

  Allows you to invest in special digital-only FD online options for short tenures with competitive rates, offering the convenience of efficient online processing and attractive returns for modern investors.

Types of Fixed Deposits (FD)

The following are the different types of FDs:
 

1. Regular income fixed deposit

   Regular income fixed deposits provide periodic interest payouts, supporting individuals who require consistent income to manage recurring expenses.

2. Standard fixed deposit

   The standard fixed deposits involve investing a lump sum for a fixed tenure with predetermined interest rates, offering predictable maturity value and financial stability.

3. Special fixed deposit

   This type of fixed deposit requires funds to remain locked for specific tenures and usually offers higher interest rates than standard deposits.

4. Tax Saving Fixed Deposit

   These fixed deposits provide tax¹ deductions under applicable limits, have a mandatory lock-in period, and do not allow premature withdrawal.

5. Senior Citizen Fixed Deposit

   Senior citizen fixed deposits offer high interest rates and flexible tenures for individuals aged sixty years and above.

Eligibility criteria for Fixed Deposit

Opening a fixed deposit account is simple, and the eligibility criteria are set up in such a way that a wide range of people can easily participate. Every Indian citizen above 18 years of age can make a fixed deposit investment. Children below 18 need to create an FD for minor accounts under the supervision of their parents or legal guardians. Non-resident Indians (NRIs) can invest in specific NRI FD schemes subject to regulatory guidelines. Moreover, other potential fixed deposit account holders include Hindu Undivided Families (HUFs), companies, trusts, and partnership firms.

Documents required for Fixed Deposit

The following documents are required for a fixed deposit:
 

1. Identity proof:

   Submit any government-issued identification, such as an Aadhaar card, PAN card, passport, voter ID, or driving licence, to verify your identity.

2. Address proof:

   Provide documents such as utility bills, bank statements, rental agreements, or a passport that confirms your current residential address.

3. PAN card:

   Mandatory for investments exceeding ₹50,000 as per income tax regulations to ensure tax compliance and facilitate TDS deductions.

4. Passport-sized photographs:

   Recent photographs are required for account opening and record-keeping purposes as per regulatory requirements.

Additional documents for specific categories:

NRIs need to provide a copy of their passport, visa, and proof of their foreign address. For minors, guardian information and a birth certificate are mandatory. Organisations and HUFs must provide their registration certificates, board resolutions, and signatory documents as per the rules.

Step-by-step guide to invest in a Fixed Deposit

The following are the steps to invest in a fixed deposit:
 

Step 1: Select the financial institution
Research and choose a bank or NBFC offering competitive interest rates and terms that align with your investment goals.
 

Step 2: Access the online platform
Visit the official website or mobile app of the selected bank and click on the fixed deposit option.
 

Step 3: Complete the registration
Log in using your existing customer credentials or create a new account by providing basic details such as your name, date of birth, mobile number, and PAN card information.
 

Step 4: Verify your identity
Complete the authentication process through OTP verification sent to your registered mobile number to ensure account security.
 

Step 5: Select the FD type
Choose from available FD schemes such as cumulative, non-cumulative, or special tenure options based on your financial requirements.
 

Step 6: Enter investment details
Specify the deposit amount, preferred tenure, and payout frequency according to your investment plan and financial goals.
 

Step 7: Review and submit
Carefully review all entered information, proceed with payment through net banking, UPI, or other available methods, and submit your application.
 

Step 8: Receive Confirmation
Once your payment is processed, you'll receive an FD receipt or certificate via email, confirming your successful investment.

How to renew Fixed Deposit (FD)?

Step 1: Issue Renewal Instructions Before Maturity
Provide renewal instructions to your bank or financial institution before the FD’s maturity date to avoid any break in earning returns.

Step 2: Choose Your Renewal Method
You have two options: 

• Online Renewal: Through internet banking.

• In-Person Renewal: Visit the branch.

Step 3: For Online Renewal

Log in to your net banking portal and select the FD account that is about to mature.

Choose one of the following: 

• Full Renewal: Reinvest the entire maturity amount.

• Partial Renewal: Withdraw part of the amount and reinvest the balance.

Review the latest interest rates offered for different tenures and select terms that suit your financial goals.

Step 4: For In-Person Renewal

Visit your bank branch and request assistance for manual renewal or set up auto-renewal.
Auto-renewal will reinvest your maturity amount automatically at prevailing rates.

Renewal instructions cannot be changed after the maturity date. Auto-renewal mandates usually cannot be cancelled once set. Always check the latest interest rates at the time of renewal, as they may differ from your original investment.

Conclusion

Fixed deposits are often considered a preferred savings option for individuals seeking stability, predictable returns, and disciplined investing. With flexible tenure options, defined interest structures, and renewal options, FDs support diverse financial needs. Understanding FD features, eligibility, documentation, and renewal processes helps investors make decisions. A well-planned fixed deposit strategy contributes to structured savings and effective financial management over time.