What Is Fixed Deposit (FD)?



Fixed deposit is one of the oldest form of savings, FD is a financial instrument where one can deposit certain sum of money to a bank or a financial institution (company) and earn a pre-determined return. Rate of interest paid varies depending on the amount and tenure. It is preferred over a savings bank account due to a higher rate of interest. Investor’s prefer to open fixed deposits as it is a safe investment option and it can be opened easily and quickly.

 How to Open a Fixed Deposit?

  • Fixed deposit account can be opened in your own bank where you have a savings account. Some private banks and all public sector banks also accept fixed deposits.
  • If you are newcomer to investments, then go with fixed deposit account. Here you can directly login from your net banking and get your amount fixed for specified tenure or you can visit your nearest bank branch.

Advantages of Fixed Deposit

  • The major advantage of investing in Fixed Deposit is its guaranteed return.
  • The only reason why everyone prefer this single concept of investment is because of its safety features. And also it is easy to raise a loan against your FD.
  • One can borrow up to 90% of the FDs amount.
  • You can invest for a time period of  6 months/ as long as 10 years/even more.

Disadvantages of Fixed Deposit

  • Fixed Deposit is less risky, this is the reason why its return's are lower compared to other investment options.
  • While your money is locked up with the bank, it is not an easy to withdraw at a moment's notice. In you withdraw before the agreement duration, you will be penalised.
  • No tax benefit in this investment.