Did you know fixed deposits are widely preferred by many Indian households as a savings option compared to some market-linked investments? One common reason is that FDs offer predetermined interest rates for the selected tenure, which helps investors plan their finances.

NBFCs like Shriram offer fixed deposit with interest rates of up to 8.15%* p.a., including additional interest benefits of 0.50%* p.a. for senior citizens and 0.05%* p.a. for women depositors (subject to applicable terms and conditions).

Fixed deposits are commonly considered a low-risk savings option compared to market-linked investments because the interest rate remains fixed for the chosen tenure.

As you consider starting your savings journey with a fixed deposit, it is helpful to understand both the advantages and limitations of FDs before investing.

Is a Fixed Deposit Beneficial and Worth Considering?

Apart from predictable interest rates, fixed deposit may offer features such as loan facilities against the deposit, flexible tenure options, and nomination facilities, depending on the financial institution’s policies.

Many investors consider fixed deposits because they offer interest rates that remain fixed for the selected tenure and are not linked to stock market fluctuations.

However, like any financial product, fixed deposits have both advantages and limitations. Investors should evaluate their financial goals, liquidity needs, and risk appetite before selecting a deposit scheme.

Pros of Fixed Deposit

A fixed deposit offers several benefits to investors. Here are a few advantages of a fixed deposit you must know;

• Predictable Interest Rates: One of the advantages of a fixed deposit is that the interest rate is predetermined for the selected tenure, allowing investors to estimate the maturity amount in advance.
• Allows Premature Withdrawal: There are various rules, terms & conditions if you want to withdraw prematurely in other investment options like Mutual Funds and Stocks. However, you must keep in mind that premature withdrawal of FD attracts penalties.
• Loan Against an FD: A loan against an FD is one of the most significant advantages of holding a fixed deposit. Investors who do not want to break an FD during emergencies can get a loan against their fixed deposit. Financial institutions grant up to 75% of the FD amount as a loan to the investors.
• Stability Compared to Market-Linked Investments: Unlike market-linked investments such as stocks or equity mutual funds, fixed deposits are not directly affected by market fluctuations during the chosen tenure.
• Easy Availability: A fixed deposit scheme is available in most financial institutions, such as all public and private banks, NBFCs, and post offices.
• Quick Renewals: Many institutions offer a renewal facility when a fixed deposit matures. Shriram Finance offers an additional interest rate of 0.15%* p.a. on the renewal of fixed deposit, subject to applicable terms.
• Additional Interest Rates for Senior Citizens: Senior citizens get an additional interest rate on top of standard interest rates when they book an FD. Shriram offers special interest rates for senior citizens of up to 0.50%* p.a.
• Flexible Tenure: Choosing your investment tenure according to your convenience is one of the pros of investing in a fixed deposit. Shriram allows investors to open an FD offline and online, through which you can choose your tenure of investment.
• Open to all: A fixed deposit is open to all. Every Indian citizen and Non-Resident Indians (NRIs) can open an FD with banks or NBFCs by verifying their Know Your Customer (KYC).

Cons of Fixed Deposit

The disadvantages mentioned below do not affect every investor and depend upon age, investment tenure and amount. However, it is essential for you to understand some of the disadvantages of a fixed deposit so you can cover all the bases when you book an FD.

• Lock-in Period: Although a fixed deposit offers quick liquidity, you may have a lock-in period to abide by until you can withdraw funds from your FD. However, you can check the Fixed Deposit Receipt (FDR) to know the exact lock-in period of your FD and plan withdrawals accordingly.
• Withdrawal Penalties: Premature withdrawal is one of the most significant advantages of an FD, but it comes with a penalty. Banks and NBFCs charge a particular percentage as a withdrawal penalty, reducing your returns. Hence, to avoid the withdrawal penalty, you can take a loan against your FD in case of any emergencies.
• No Changes in Interest: The FD interest rate is locked in at the time of booking and remains unchanged until maturity. This means that even if market interest rates rise during your FD tenure, your deposit will continue to earn at the originally agreed rate.

Conclusion

Understanding the advantages and limitations of fixed deposits can help you make informed financial decisions.

Fixed deposits may be considered by investors who prefer predictable interest rates and defined tenures. However, it is important to evaluate your financial goals, liquidity needs, and tax implications before investing.

Shriram offers fixed deposit schemes with interest rates of up to 8.15% p.a., including an additional interest rate of 0.50%* p.a. for senior citizens and 0.05%* p.a. for women depositors.

Key Highlights:

• Fixed deposits offer predetermined interest rates for the selected tenure.
• FDs are not directly linked to stock market fluctuations during the deposit tenure.
• Investors should consider liquidity, tenure, and interest rates before investing.
• Shriram Fixed Deposit offers interest rates of up to 8.15%* p.a., including an additional interest rate of 0.50%* p.a. for senior citizens and 0.05%* p.a. for women depositors.

FAQs

Are fixed deposits risky?

Fixed deposits are generally considered lower-risk compared to market-linked investments, but they still depend on the financial stability of the issuing institution.

Why is FD low-risk?

FDs are often considered lower-risk because the interest rate remains fixed for the selected tenure and is not directly linked to stock market movements.

What are the conditions of a fixed deposit?

Fixed deposits welcome individuals aged 18+ (residents, NRIs, minors via guardian) with PAN, address proof, and bank details. Minimum deposit starts at just ₹5,000. Flexible tenures range from 12–60 months. Choose interest payout options, including monthly, quarterly, or cumulative at maturity. Premature withdrawal is available after a 3-month lock-in with a penalty. Enjoy loans of up to 75% of the FD value.

Is FD good for long-term investment?

Fixed deposits can be used for short-term or medium-term financial planning, depending on the tenure selected.

Should I put all my money in an FD?

It is generally advisable to diversify investments across different financial instruments rather than placing all funds in a single asset class.