Fixed deposits are some of the most reliable investment options in India. They are often the best avenues to grow your money significantly over the long haul. FDs, as they are colloquially known, are also popular due to their risk-free nature. You can expect guaranteed returns without any market-related risks. Here is a guide to all the key elements of FDs, right from the eligibility criteria to minimum deposits and more.
Key Things to Know While Opening Fixed Deposits
Here are some of the major things that you should keep in mind while opening a fixed deposit account.
Minimum investment- This varies across banks, with some allowing you to open FDs for as little as Rs. 1,000, while it may be higher for others. Tenure- You should choose the tenure carefully based on your financial goals while opening your FD. The minimum tenure is usually seven days at most banks, with the maximum going up to 10 years or even more. Interest Rate- Check the interest rates before finalizing an FD and compare them with similar products from other banks. Remember that senior citizens usually get an additional 0.5% interest on their deposits. Most banks have this facility for senior citizens. Type of FD- You can opt for a cumulative fixed deposit where the interest is compounded annually and the total amount released upon maturity. It is usually the best option if you want to grow your corpus and benefit from compounding. Another option is to choose a fixed deposit monthly income scheme or quarterly payouts, depending on your preferences. While this will give you slightly lower interest income, since the FD is compounded at shorter intervals, you can build a regular income stream to cover various requirements. Overdraft Facilities- It is advisable to choose a bank that offers overdraft facilities on fixed deposits. It will ensure instant liquidity and availability of cash if you have urgent financial needs. You will not have to break your FD if you avail of the overdraft facility offered by your lender.Now that you know the basic aspects, let us check the eligibility criteria for overdrafts.
FD Eligibility CriteriaWhile the eligibility criteria vary across different traditional and small finance banks, here are some general requirements.
Resident Indians Sole Proprietorship Firms Limited Companies Trust Accounts Hindu Undivided Families (HUFs)These are the types of applicants permitted to open fixed deposit accounts at most banks and financial institutions. With this out of the way, it is time to look at some of the key benefits of FDs and why you should choose them.
Advantages of Fixed DepositsHere’s why you should consider choosing FDs to invest your money:
Easy to open at most banks with minimal documentation. Broad eligibility criteria without specific limitations. Overdraft facilities to help you get access to funds in emergencies. Multiple payout options for interest- at maturity, monthly, quarterly, etc. Completely risk-free investment with guaranteed returns that are not linked to market risks.So, as you can see, setting up a fixed deposit account is easy and does not take too much time. All you have to do is compare lenders and their interest rates (going for the highest rate) along with other terms and conditions before finalizing the best one based on your needs. With a long-term FD investment, you can create decent wealth to meet your future financial requirements.
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