What is a Fixed Deposit?
A fixed deposit signifies an investment pattern that, banks, Co-op Credit societies, post-offices, and other non-banking financial institutions provide. FDs offer superior returns on the principal invested when equated to the returns produced from a regular savings account.
How does it work?
In the case of Fixed Deposits, you invest for a fixed amount of time and get a fixed interest rate, hence the name. Based on a consumer’s investment portfolio, the FD investment period can either be short-term or long-term. The interest rates on fixed deposits may vary from one financial institution to another.
Fixed deposit investors cannot withdraw money before maturity without any financial repercussions. In emergencies, early withdrawal is possible after the payment of penalties.
In today’s times of increasing market volatilities, investing in a Fixed Deposit can help you get secure returns and stable growth of capital so you can build your savings with absolutely no effect of market uncertainties.
What are the benefits of investing in Fixed Deposits?
Fixed Deposit investors expect the following benefits from their investment
- Fixed returns – Unlike most other investment plans, FDs offer assured returns on the deposited amount. So, no matter how interest rates move or economy acts, you will get the returns promised at the time of investing.
- Assurance: At the end of the investment tenure, you get back the amount you put in along with the accumulated interest.
- Flexibility – The best FD plans offer flexibility when it comes to the tenure of the plan. Based on the investment goals, you can either open short-term FD accounts or long-term FD accounts. Most financial institutions offer maturity tenures extending from 31 days to 5 years.
- Low-Risk Level- There are various ways to invest your money. The investment options such as mutual funds, bonds and stocks give you high returns, however, they are volatile in nature as they are linked to market risks. People who do not want to or are not ready to take such risks can invest in FD. They are a great option for people with long-term financial goals.
- Higher interest for Senior Citizens: For Senior citizens pursuing safe investment avenues to invest their life savings, there are several benefits of Mudra fixed deposit. As a senior citizen, you can easily gain additional rate benefit of 0.5% over and above the regular interest rate.
- A surplus source of income – The investor can select the frequency of interest payout for non-cumulative fixed deposit plans. Therefore, they can act as an added source of income.
Who offers a Fixed Deposit?
As stated earlier, fixed deposit investments are offered by banks, Co-op Credit societies, post-offices, and other non-banking financial companies. In India, investors have numerous options to open fixed deposit accounts. However, they must compare the interest rates, the credibility of the financial institution, and other features before depositing their funds.
What are the Prevailing FD Rates?
There is no one fixed rate on FD investments across the financial domain. The rate of return for an investor greatly depends on the Co-op Credit society, bank or financial institution offering the investment option. Each one provides different interest rates on deposits. Moreover, the return rate also depends on the age of the investor. Senior citizen investors can expect greater returns when compared to individuals below 60 years.
At Mudra, you get attractive FD interest rates of up to 9% (9.5% for senior citizens) so you can save for your goals easily. Investing in a Mudra Fixed Deposit is easy, as you can invest from the comfort of your home through an end-to-end paperless online investment process in 3 easy steps. Link - https://www.mudraonline.in/fd
Who should invest in Fixed Deposit?
Fixed deposits are perfect investment tools for investors across varied profiles, objectives,s and age groups. Further, gain-seeking, risk-averse individuals can benefit significantly from such schemes. Since FDs offer assured returns, there is no risk involved.
Who is eligible to open an FD account?
The following people are eligible to invest in a fixed deposit:
- Hindu Undivided Family (HUF)
- Group Companies, Limited Companies, Partnership Firms
- Sole Traders
- Associations, Clubs, and Societies
- Family Trusts
- Minors (through their natural or legally appointed guardian)
Why consider FD for a diversified portfolio?
Investors may be prone to risks when they invest in market-linked instruments to earn higher returns. Hence, to ensure equalized financial growth, investors need to seek safer investment options as well.
Fixed deposits are safe and lead to guaranteed returns, as opposed to risk-prone instruments. Therefore, even when an investor loses money on other investment instruments, they can recover a portion of their losses from the FD investments.
Are there special rates for senior citizens?
Most financial institutions do offer special interest rates for senior citizens.
Can I break a Fixed Deposit before maturity?
Yes. If you need funds urgently you can avail of premature withdrawal of your Fixed Deposit.
You can either break your FD or partially withdraw it, although there are penalties for the early closure.
This will attract a penal interest which will be charged/deducted from the interest rate of the tenure completed by the fixed deposit. In the case of partial withdrawal, similar rules of premature withdrawal are applicable.
What happens if the depositor passes away?
In case of unforeseen circumstances, the Fixed Deposit amount can be claimed by the nominee on maturity. This can differ depending on the mode of holding.