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Fixed Deposits

Fixed DepositsA fixed deposit account allows an investor to deposit his money with banks for a fixed period of time thereby making him earn a higher rate of interest in return .the duration of such deposits generally ranges from 15 days to five years and above. At maturity, the iInvestor gets a lump sum (principal + interest) at the maturity of the deposit. Bank fixed Deposit are one of the most common form of savings available to the average investor. Thet score better than the normal savings account of the bank as they give a higher rate of interest to the investor. There are distinct facilities attached with a fixed deposit like the overdraft (loan) facility on the amount deposited, premature withdrawal before maturity period (which involves a loss of interest) etc. Bank deposits are fairly safer because banks are subject to control of the Reserve Bank of India.

Features of Fixed Deposits

Bank deposits are fairly safe because banks are subject to control of the Reserve Bank of India (RBI) with regard to several policy and operational parameters. The banks are free to offer varying interests in fixed deposits of different maturities. Interest is compounded once a quarter, leading to a somewhat higher effective rate. The minimum deposit amount varies with each bank. It can range from as low as Rs. 100 to an unlimited amount with some banks. Deposits can be made in multiples of Rs. 100/-.

From the perspective of investment it is always advisable to keep the amount to be invested as FD in two or three small deposits instead of making one big deposit. In case of any premature withdrawal of partial amount, any one of the deposit can be prematurely encased. The loss sustained in interest will, thus, be less. The most important thing to consider before investing in an FD is the rate of interest and the inflation rate. A high inflation rate can simply chip away your real returns.

Advantages of Fixed Deposits

Bank deposits are the safest investment after Post office savings because all bank deposits are insured under the Deposit Insurance & Credit Guarantee Scheme of India. It is possible to get a loans up to75- 90% of the deposit amount from banks against fixed deposit receipts. The interest charged will be 2% more than the rate of interest earned by the deposit. With effect from A.Y. 1998-99, investment on bank deposits, along with other specified incomes, is exempt from income tax up to a limit of Rs.12, 000/- under Section 80L. Also, from A.Y. 1993-94, bank deposits are totally exempt from wealth tax. The 1995 Finance Bill Proposals introduced tax deduction at source (TDS) on fixed deposits on interest incomes of Rs.5000/- and above per annum.

How to apply

One can get a bank FD at any bank, be it nationalized, private, or foreign. You have to open a FD account with the bank, and make the deposit. However, some banks insist that you maintain a savings account with them to operate a FD. When a depositor opens an FD account with a bank, a deposit receipt or an account statement is issued to him, which can be updated from time to time, depending on the duration of the FD and the frequency of the interest calculation. Check deposit receipts carefully to see that all particulars have been properly and accurately filled in.

Returns on Fixed Deposits

The rate of interest for Bank Fixed Deposits varies between 4 and 11 per cent, depending on the maturity period (duration) of the FD and the amount invested. Interest rate also varies between each bank. A Bank FD does not provide regular interest income, but a lump-sum amount on its maturity. Some banks have facility to pay interest every quarter or every month, but the interest paid may be at a discounted rate in case of monthly interest. The Interest payable on Fixed Deposit can also be transferred to Savings Bank or Current Account of the customer. The deposit period can vary from 15, 30 or 45 days to 3, 6 months, 1 year, 1.5 years to 10 years.

Duration Interest rate (%) per annum

15-30 days 4 -5 %

30-45 days 4.25-5 %

46-90 days 4.75--5.5 %

91-180 days 5.5-6.5 %

181-365 days 5.75-6.5 %

1-2 years 6-8 %

2-3 years 6.25-8 %

3-5 years 6.75-8

Please Click in the link below for the complete list of Fixed Deposit interest rate with different banks in the country

Public Sector Banks

Private Sector Banks




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