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A fixed deposit is an investment instrument

How Does a FD Work? Is it safe to invest your money in a Fixed Deposit?

A fixed deposit is an investment instrument

A Fixed Deposit (FD) is one of the safest investment options as market fluctuations do not impact the interest rates. The tenure and investment amount predetermine the interest rate in a fixed deposit. A fixed deposit also helps you to develop a healthy savings habit and earn interest on the deposit. 

A fixed deposit allows an investor to grow their finances over a set tenure. A high interest rate should be the top priority when selecting an FD. You can choose between a cumulative or non-cumulative type of fixed deposit according to the interest payout required.

A Shriram Fixed Deposit offers assured returns and high interest rates of up to 9.20%* p.a., including 0.50% bonus interest for senior citizens. Use the Shriram FD calculator to determine the amount of interest you can get on the tenure of your choice.

How does a Fixed Deposit Work? 

A fixed deposit is a financial tool provided by banks and NBFCs (Non-Banking Financial Companies) to help individuals invest and achieve their financial goals. It is one of the safest modes of investment and is easy to understand. You need to invest a lump sum of money for a specific tenure to open a new fixed deposit.

An FD can be considered a deposit given to a bank or NBFC. When you invest in an FD, you are given the assurance of guaranteed returns. The interest in an FD depends on the tenure selected by the depositor. Market fluctuations will not impact the rate of returns as it is fixed once the term is decided. 

How Safe is a Fixed Deposit? 

A fixed deposit is one of the safest investments because the interest rate is fixed until maturity. Since the interest rate is not dependent on the market, low risk is involved. Some banks offer insurance on FDs opened with their institution to keep the deposit safe.

A corporate fixed deposit offers higher interest rates and has a ranking system to prove the level of safety they offer. Private rating agencies like ICRA, CRISIL, etc. rank the NBFCs on their safety and credibility. Companies with an "AA" to "AAA" credit rating indicate a moderate to high safety of interest payments.

What are the Features and Benefits of a Fixed Deposit? 

A fixed deposit is a flexible and customisable investment option to help you plan financial goals as per your requirements. Here are some of the benefits and features to consider while selecting a fixed deposit:

  • An FD has a flexible tenure through which you can plan your financial goals efficiently
  • The interest on an FD is calculated according to the tenure of the deposit
  • You can avail of a loan against your fixed deposit with just a few documents
  • It is a significant savings option for amateur investors
  • Premature withdrawal is allowed, but a penalty will be charged on the interest for the same
  • You do not need to regularly check on your deposit as market fluctuations do not impact the principal amount

What are the Types of Fixed Deposits? 

  • Regular FD

A fixed deposit with a predetermined interest rate for a defined period is called a regular FD. This type of FD is available at banks, NBFCs and post offices. A regular fixed deposit can have a tenure between 7 days and 10 years.

  • Corporate FD

A corporate FD is offered only by private companies and Non-Banking Financial Institutes. With a corporate fixed deposit, you can get a higher rate of returns than a bank. A corporate FD also has a unique rating system to help you understand the amount of security provided by the financial institution.

  • Cumulative FD

A cumulative FD is the type of deposit in which the interest payout will only happen upon maturity of the deposit. You can get a higher interest rate than a regular FD with a cumulative fixed deposit. A cumulative deposit is a fantastic investment option for those investing in a long-term fixed deposit.

  • Non-cumulative FD

With a non-cumulative fixed deposit, you can get a regular interest payout to handle minor financial expenses. You can choose between a monthly, quarterly, half-yearly and yearly interest payout.

  • Senior Citizen FD

A senior citizen fixed deposit has many benefits that allow the elderly to earn more investment returns. Most banks and NBFCs offer 0.50% extra interest for every deposit opened by a person over the age of 60 years.

  • Tax-Saving FD

As the name suggests, this fixed deposit plan can help you save tax through your fixed deposit investment. You can claim tax exemption of up to Rs. 1.5 lakh per annum. The FD has a lock-in period of 5 years, during which you will not be allowed to withdraw any funds.

Invest in an FD and Grow your Wealth

A fixed deposit is a great investment option that helps you develop a healthy savings habit. It is one of the safest investment plans among all the options available. Market fluctuations do not affect an FD because the interest rate is predetermined and does not change till after the maturity of the deposit.

Start your investment journey with a Shriram Fixed Deposit. With the trust of over 2.12 million customers, Shriram offers a high-security deposit. The Shriram FD has been rated "[ICRA]AA+ (Stable)" by ICRA and "IND AA+/Stable" by India Ratings and Research (Indicating a high degree of safety).


1. Is a fixed deposit a safe investment? 

Yes, a fixed deposit is a safe investment. The interest rate is predetermined, so the returns are not impacted by market fluctuations.

2. Can you lose money in a fixed deposit?

You can lose interest on a fixed deposit if you withdraw it before the maturity day. 

3. Is fixed deposit interest paid monthly?

You can get an interest payout monthly if you open a non-cumulative fixed deposit. Invest in a Shriram non-cumulative deposit to get one of the best interest rates to grow your finances.

4. How small can an amount be deposited in a fixed deposit?

There is no limit to the maximum amount that can be deposited in a fixed deposit. However, the minimum limit to open an FD at most financial institutes is Rs. 1000.

Key Highlights:

  • A fixed deposit is not affected by market fluctuations, making it one of the safest investment options.
  • The interest rate of a fixed deposit is calculated according to the tenure you select for your deposit.
  • You can develop a healthy savings habit by investing in an FD.
  • A depositor can get a regular interest payout if they invest in a non-cumulative fixed deposit.
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