Fixed Deposits, also known as FDs and Term deposits, it investment instruments offered to customers by banks and non-banking financial companies. In this, people invest a certain amount of money for a certain amount of time for a fixed interest rate. Usually, this interest is higher than the interest which financial institutions offer on savings accounts.
Most of the people opt for fixed deposits because they are one of the safest investments. It offer a high degree of stability and the returns are always without of any risk.
The duration of fixed deposits can range from a short duration of seven to fourteen days to a longer time of 10 years.
Institutions also offer a higher fixed deposit return for senior citizens. Banks and other institutions also allow for people to liquidate their FD at an earlier stage before the fixed deposit has matured, but they would have to pay a small penalty for that.
Usually, non-banking financial companies provide higher rates than banks; however, tax is always deducted.
Some of the factors that influence your fixed deposit returns are:
- Cumulative deposit –in this deposit, the return is credited to the fixed deposit annually and is paid when the FD has matured.
- Non – cumulative deposit – in this deposit, the return is given to the person at an agreed frequency; this can be monthly, every 3 months, every 6 months, yearly. Th type is usually used by people who use the returns to meet daily expenses.
Duration of the Fixed Deposit –
The fixed deposit interest rates that you receive for your deposit is linked to the time limit of your fixed deposit directly. In most situations, you can get a higher return when you deposit for a longer time period compared to a shorter time period. Someone investing for 10 years would get a higher return than someone investing for 2 years. That is why there are different types of FDs one can choose from: short term (this is for 1-3 years), medium-term (3-5 years) and long-term (5 – 10 years).
Interest rate –
senior citizens usually get a higher interest rate of approximately 0.25% more than the normal one. 2 types of interest rates.
There are rating agencies like CRISIL Ltd, India Ratings and Research Pvt Ltd, ICRA Limited, Brickwork Ratings India Pvt Ltd, SMERA Ratings Limited and CARE that assess various parameters to rate certain financial institutions. . Such ratings are what people always consider before depositing and opening an account; it helps to choose where there will be minimal risks.
Loan facility –
FD accounts help people and automatically make them eligible to get a loan. Such loans allow depositors to withdraw up to 75% of the invested amount, and they would have to pay 2% more than the highest prevailing FD interest rate; thus, the term for the loan becomes the same as the FD term. For example, if one invests for 8 years and applies for a loan in the first year, then they would get 7 years to repay that loan.
Financial institution –
Even though a fixed deposit provides for a steady and regular income, some institutions may not be trustworthy or good to invest in. some financial institutions may be providing better services and may be better than other institutions; thus, one should do proper research before taking any decision.
One such financial institution that provides Fixed deposits is PNB Housing. Its a high degree of safety rated CRISIL FAA+.
It offers a high rate of return depending on the duration and also provides benefits of 0.25% higher interest rate for senior citizens. They also provide loan facilities against the fixed deposits for up to 75%; however, they do not allow premature withdrawal of deposits of 3 months. PNB facilities provide FDs at promising rates.