Business Line - As banks' chase for customers to collect cheap deposits not fructifying, they are forced to offer inflation-beating real interest rates on fixed deposits now, and state-run banks led by Punjab and Sind Bank tops the chart offering 8-8.5% per annum deposit rate. Read more
What is a fixed deposit (FD)? It is an investment instrument that banks and non-banking financial companies (NBFC) offer their customers. Through an FD, people invest a certain sum of money for a fixed period at a predetermined rate of interest.
The rate of interest varies from one financial institution to another, although it is usually higher than the interest offered on savings account. One can choose to reinvest the interest or receive an interest amount periodically in one's bank account.
Types of fixed deposits:
Standard Term Deposits: These are investment schemes wherein the amount is invested for a fixed period and a predetermined interest rate. The period of investment or tenure can range from 7 days to 10 years. The interest offered depends on the durration of interest as well as the financial institution.
Senior Citizen Fixed Deposits: For individuals over 60 years of age, banks and NBFCs offer higher rate of interest on FDs than other investors, usually providing about 25 to 50 basis points more. They are also provided and additional tax benefit.
Tax-Saving Fixed Deposit: There are specific tax-saving FDs that are eligible for tax deductions. A tax-saving FD has a maturity period of 5 years and the principal amount, up to ₹1,50,000 per annum is tax-deductible under section 80C of the Indian Income Tax Act.
Recurring Deposit: It is a type of fixed deposit wherein one can invest a fixed some monthly or quarterly for a specified time. The interest rate is predetermined. At maturity, the principle will be along with the interest calculated proportionately.
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