A fixed deposit (FD) is a financial instrument provided by banks or NBFCs which provides investors a higher rate of interest than a regular savings account, until the given maturity date. The tenure of an FD can vary from 7, 15 or 45 days to 1.5 years and can be as high as 10 years.


  • Customers can avail loans against FDs up to 80 to 90 % of the value of deposits. The rate of interest on the loan could be 1 to 2 % over the rate offered on the deposit.
  • Residents of India can open these accounts for a minimum of seven days.
  • Investing in a fixed deposit earns customers a higher interest rate than depositing money in a saving account.
  • Tax saving fixed deposits are a type of fixed deposits that allow the investor to save tax under Section 80C of the Income Tax Act. 

Terms of Withdrawal:

  • The investments in fixed deposits are locked for a stipulated time period and hence the amount invested for that time cannot be withdrawn prematurely. In case of withdrawal before maturity period the fixed deposit needs to be broken drawing lower rate of interest and payment of a penalty.
  • Income funds allow flexibility in withdrawal as investors can withdraw their investments at any time without losing out on their interest. The income fund need not be dissolved as there is no lock-in period for the invested amount. Penalties may be charged on exiting the fund within a short duration.

Senior Citizen Fixed Deposits:

  • The depositor should be 60 years and above at the time of opening the fixed deposit account.
  • Depending on the bank, interest rates are higher by 0.25% to 0.50%.
  • The tenure is between 7 days and 10 days.
  • Loan against FD can be availed.
  • Penalties for premature withdrawal are the same as for the general public.

Author: sapna panth

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