Bank FD

Bank FD of Nationalised Bank in India

Fixed deposit refers to a deposit where a certain amount of money is locked up for a set period. The person who invests the funds decides the tenure of the fixed deposit. The tenure can be as short as a few days up to many years. Fixed deposits offer a fixed interest rate in return for locking these funds. Fixed deposits are offered by all banks at different rates. It is easy to open a fixed deposit online or offline. We will examine the benefits and drawbacks of fixed deposit accounts to help us decide if investing in fixed deposits is the right choice.


Let's examine the advantages and disadvantages of fixed deposits.


Fixed Deposit Advantages:

Assured rate for return

A guaranteed rate of return is the main reason people choose to invest their funds in a fixed deposit. Fixed deposit accounts are guaranteed to give you the specified rate of return if you place your money in them. The fixed deposit interest rate is published by banks on their websites and at branches. This makes it simple for customers to determine how much return they will receive. A fixed deposit interest calculator is available on banks' websites. This allows customers to calculate how much interest they will get if they invest a certain amount of money over a specific period.

For interest, there is a tax threshold

Banks do not have to deduct interest tax until the amount exceeds Rs. 10,000 This means that unless the customer's total interest on fixed deposits exceeds Rs. 10,000, there will be no tax. The bank will not deduct tax if the customer has earned more than Rs. 10,000 on fixed deposits. This is a comfort for small deposit holders.

Flexible tenure

A fixed deposit has a flexible tenure that depends on the deposit holder. The minimum tenure rules of each bank are different, but the deposit holder can make the final decision. You can also decide to redeem your fixed deposit or extend it for the same time.

Easy liquidation

Liquidating a fixed deposit is easy. Online FDs can also be liquidated via net banking. Most banks have a form that can be used to liquidate FDs.

Loans against fixed deposit:

An FD is a reliable instrument that you can keep in your pocket for financial emergencies. It is easy to take a loan against your fixed deposit. The bank may allow you to borrow up to 95% of your fixed deposit amount. It is a reliable investment.


Disadvantages of Fixed Deposits:

Reduce interest rates

Fixed deposits offer many benefits, but the interest rates don't move with inflation. In some cases, fixed deposits may earn less than the inflation rates. Fixed deposit interest rates have fallen in recent years, which has made this investment less attractive.

Funds locked in:

Fixed deposits lock your funds in place for a set period. You cannot withdraw these funds before the end of their term. Fixed deposits are not liquid and can't be converted to cash easily.

Penalties on pre-mature withdrawal:

Banks will charge a penalty to depositors who withdraw fixed deposits early. This penalty comes in the form a lower rate of interest.

There is no tax benefit

The interest earned on fixed deposits is added as taxable income to the deposit holder. Any interest earned is exempt from tax. Senior citizens can get a Rs. Interest up to Rs.50,000

Fixed interest rate

Fixed deposit rates remain the same throughout the term. The bank will not pay any additional interest to deposit holders even if rates rise.


A fixed deposit account is a good option for those who don't have a lot of risk appetite. This is the account for you if you like to have a fixed income. This type of investment is not likely to earn you much. Banks offer a sweep-in facility that allows excess funds from a saving account to be transferred to a fixed deposit until the customer requires them. This feature can help increase your fixed deposit account's returns.


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NOTE: As this is a Govt. of India scheme, customers are advised to visit National Savings Institute website for latest instructions/ modification in the scheme.

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