When you deposit at a fixed interest rate for a
predetermined tenure in a bank, it is called a Fixed Deposit or FD. Fixed
deposits were tried and tested for a significant period and delivered good
returns consistently, which makes them one of the best investment options
possible. FDs are also a good starting point for somebody who is a first-time
investor.
Benefits of Fixed Deposits (FDs) in India
There are many reasons why Fixed Deposits is one of India's
most common finance items. Here are some of India's critical benefits of Fixed
Deposits:
Get Guaranteed Returns: Return on investment is ensured.
Regardless of the amount you have deposited in an FD, you will be paid interest
at the interest rate that prevails at the time of deposit creation. Market
fluctuations will not impact the returns on your investment. This is probably
why most experienced investors still like to keep a portion of their investment
in fixed deposits
Determine the Tenure: Fixed Deposit tenures are very
versatile. Based on customer requirements, it ranges from 7 days to 10 years. You
may have several Fixed
Deposits for the same or different tenures at the same time in the same
bank. For each FD, you will receive a separate receipt.
Make More Money: As contrasted with a savings account, the
rate of return on fixed deposits is much higher. The interest rates change
based on Fixed Deposit term. For FDs of longer tenure, the interest rate is
most often higher. There are a few exceptions as banks set the interest rate
for fixed deposits based on their expectation of the repo rate (the rate at
which RBI loans money to the banks). If a bank feels the repo rate will rise
after 5 years, FDs with tenure exceeding 5 years will have a lower interest
rate than one with a tenure of 3 years. Using a fixed deposit calculator will
help you to understand how it works.
Choose the Frequency of the Interest Payment: The
customer can choose the level of interest that they wish to receive, whether on
a monthly, quarterly, or annual basis. This will end up being another revenue
source for the customer. On the other hand, they can opt for a Cumulative FD
that will reinvest interest in the FD, delivering even better returns. An FD calculator
can help you figure out the returns on term maturity.
