Key features of Fixed Deposits

Features of Fixed Deposit: In current high inflation system, banks are offering competitive fixed deposits (FD). As banks are on war to offer attractive deposit rates, investment in bank Fixed Deposits appears sound investment avenue. Bank Fixed Deposits offer guaranteed returns and you can get interest income monthly, quarterly or cumulative basis.

Main features of Bank FD:

  • Tenure ranges between six months to 10 years
  • Guaranteed Returns
  • Interest income monthly, quarterly or annually.
  • Reinvest interest income and gain the influence of compounding
  • Partial or full withdrawal facility is available with penalty interest rates
  • Loan against deposits
  • Senior citizens get higher coupon rates in the range of 0.25 -1.00 %.

Most indefinite facts about bank Fixed Deposits: Bank Fixed Deposit are the safest financial products because deposits up to Rs 1 lac are covered under insurance. In case banks default you get principal amount up to Rs 1 lac depending on your deposit amount under insurance cover. If you have multiple accounts in different banks, then each deposit is insured up to Rs 1 lac.

You can also get loan against your deposits. The interest rate of loan is higher than 2% of FD rate. You are eligible up to 75-90% of your Fixed Deposits as loans (vary from bank to bank).

Banks also offer tax-saving Fixed Deposits which have minimum five year lock-in period. One can’t get loans against these Fixed Deposits. Investment in these Fixed Deposits is eligible for tax exemption under 80C of IT Act.

Factors you should know before selecting a Bank FD:

(1) Compare rate of interests (Fixed deposit rates)

(2) Type of interest (Fixed rate or floating rate)

(3) Frequency of compounding

(4) Mode of interest payout

(5) Withdrawal facility

(6) Sweep facility

(7) Know other attached benefits.