What You Should Know About Fixed Deposits?

What You Should Know About Fixed Deposits?

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Since fd interest rates are seen as high and safe, offer guaranteed returns over time, and have variable durations, they have long been associated with investing.

  • You will receive fixed returns on the basis of the interest rate at the time of investment, regardless of changes in interest rates or the state of the economy.

Customers of banks and non-banking financial institutions (NBFCs) can invest their money in fixed deposits, or FDs. People invest a specific amount of money through an FD for a specific amount of time at a specific rate of interest. Although it varies from a financial institution to financial institution, the rate of interest is typically higher than the interest rate on savings accounts. Fixed deposits are available for varied lengths, ranging from very short-term tenures of 7-14 days to large tenures of 10 years. A term deposit is another name for a fixed deposit.

Know about the working of fixed deposits

When you invest in an FD, the financial institution assures you that it will return your money at the end of the tenure, often known as the maturity period and that it will also pay you interest. This cash may be used by the bank to lend to borrowers, who will be charged interest. The tenure or maturity duration of the FD determines the interest that will be offered. In comparison to a one-year FD, a 7-day FD will have a lower annual interest rate. This is done to make up for the financial time risk.

Features of an FD

Now, to fully comprehend what a fixed deposit is and whether it is right for you, you should also be familiar with its essential characteristics.

  • The sum may only be deposited once. You should start a new Fixed deposit if you want to make more deposits.
  • The interest rate is more than the savings account’s rate.
  • Fixed deposits may be renewed easily for periods between 7 days and 10 years.
  • Before the maturity period, withdrawals are not permitted.

Conclusion 

One of the most popular investment alternatives in India is the fixed deposit (FD), which gives higher interest rates than a savings account. FDs are frequently used to save for a variety of short-, medium-, and long-term financial goals because their tenure can range from 7 days to 10 years. You can use fd calculator for easier calculation.

The Reserve Bank of India’s guidelines dictates how the interest rate will vary. Because of the security of the principal amount and how the money develops in addition to an assured rate of interest, fixed deposits have long been a popular kind of investment for Indians.

The ability to claim or reinvest interest provides people with a consistent source of income. With banks providing investors with better interest rates, fixed deposits will undoubtedly become more and more popular over time.

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