The purpose of saving money is essentially two-fold. One is to build wealth, and the other is to enjoy a good quality of life in the future. This is precisely why you need to choose your investments wisely, keeping your future goals in mind.

Although there is a wide range of financial instruments available for making profitable investments, one of the deciding factors is the risk appetite of the investor. Investing in low-risk financial instruments like fixed deposit (FD) investments is always recommended.

The primary benefit of fixed deposits is that they give a fixed return based on the pre-determined fixed deposit interest.

FDs in India are considered to be a reliable form of investment. By knowing the rate of interest beforehand, you can plan your returns with accuracy.

What is a Fixed Deposit?

A Fixed Deposit investment is wherein a lump sum amount from your account is set aside or invested for a particular period of time at a fixed rate of interest. They are offered by banks and NBFCs (Non-Banking Financial Companies). Investments in FDs in India can be made through offline as well as online modes.

When you open a fixed deposit account, a certificate is given to you, which has all the details related to the fixed deposit. These include your personal details, the amount invested, maturity, tenure, type of FD investment, nominee, etc. You can also open a fixed deposit in a minor’s name as their parent and legal guardian with their KYC details like Aadhar Card. When the child turns 18, the maturity amount will be transferred to their account directly.

Benefits of Fixed Deposits

The risk and expected returns of your investment play a vital role in effective financial planning. FD investments are great for those with a low-risk appetite because of their steady nature and other numerous benefits they offer:

• FD investments give consistent returns.
• Fixed deposit interest remains constant till maturity
• Tenure can be chosen by you.
• You can get a loan against your FD investment.

We have curated a list of things you should know if you have made a fixed deposit investment in India so that you can make well-informed investing decisions.

Things to know about FD investments

Interest Rates on FDs are Fixed

Interest rates vary depending on the tenure selected and the institution offering the deposit. Before investing, it is advisable to compare rates across tenures and institutions.

A common question is whether FD interest rates change after investment. Once an FD is booked at a fixed rate, the rate remains unchanged for the entire tenure, even if market rates move later.

Many institutions offer an additional interest benefit for senior citizens, subject to applicable terms.

You Can Decide When You Want to Withdraw the Interest on Your FD Investments.

You can choose the frequency of the interest payout to suit your investment needs. You can choose cumulative or non-cumulative fixed deposit investments. If you do not want to withdraw the interest earned on the FD, you can opt for cumulative investment. Here the interest is compounded and gets accumulated along with the invested amount. You will receive the entire amount upon maturity.

If you are looking at regular income, then you can opt for non-cumulative FDs. Earlier banks and financial institutions would offer only quarterly or annual withdrawals. Nowadays, they have started offering monthly interest payouts as well. This scheme is beneficial for retired individuals who are looking for regular monthly income.

The Tenure of Fixed Deposits Ranges Widely

This tenure states the amount of time needed for the fixed deposit to mature. NBFCs FDs in India generally offer tenures between 12 and 60 months. You can choose your tenure depending on your financial goals.

You Should Nominate Your Loved Ones When You Open Fixed Deposits

You should choose a nominee when you open a fixed deposit account. In case of unforeseen circumstances, your nominee will receive the entire amount in your absence. By choosing a nominee, you will be ensuring that your invested amount is given to your loved one without any complications.

The details of the nominee, like their name and their relation to you, should be mentioned on the account opening receipt. In case you fail to fill in the nominee details, your loved ones might find it hard to claim the returns from your FD investment.

You Can Choose to opt For an Auto-Renewal of Your FD

Auto renewal facility is provided to all fixed deposit account holders. When you invest in a fixed deposit, you may instruct the institution to auto-renew if you have plans to reinvest it further. This way, upon maturity, the principal amount, along with the accrued interest, is automatically reinvested for a further tenure as chosen by you. The auto-renewal will be mentioned in your account opening receipt. This makes it a hassle-free investment option.

You Can Choose to Receive Your Funds Upon Maturity

Auto credit facility instructs the institutions to deposit the entire amount of the FD in your account at the time of maturity. This saves you time and effort to close your fixed deposit investment. Communicate your choice to the financial institution for a smooth investing experience.

Loan Against Your FD

In case of an emergency, if you need funds but do not wish to avail the premature withdrawal facility, then you can opt for a loan against your fixed deposit. Institutions generally offer loans up to a percentage of the deposit amount, subject to terms.

The interest rate on such loans is typically slightly higher than the FD rate. This option allows the deposit to continue earning interest while providing liquidity.

Parting Thoughts

Now that you know these details about fixed deposits, you can plan your fixed deposits wisely to meet your financial objectives. Choose the features of your fixed deposits to suit your goals and enjoy a hassle-free investing experience.

Shriram Finance offers attractive interest rates, and you can start investing with an amount as low as ₹5,000. Before investing, you may use the FD Interest Calculator to estimate your potential maturity value and interest earnings. Invest Now!

Key Highlights

• Investing in a fixed deposit is a reliable investment with consistent returns.
• You can take a loan against your FD to meet any financial needs.
• Senior citizens can avail an additional 0.50%* p.a. with Shriram Fixed Deposit.

FAQs

Which FD has the highest rate of return?

Interest rates vary across institutions and tenures. Shriram Fixed Deposit offers interest rates 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.

Can you double your money using FD?

Fixed deposits cannot help you double your money magically. FDs earn interest at a predetermined rate. Over longer tenures, the invested amount may grow significantly depending on the rate and compounding option selected. Investors should review tenure and compounding details before investing.

Is it possible to withdraw money from a fixed deposit before it matures?

Yes. However, you would be charged a nominal penalty for premature withdrawals

What happens if we do not withdraw our FD when it matures?

If a fixed deposit matures without being claimed, the money is usually transferred to the bank account that the investor specified on the initial investment form.