Fixed Deposit

Fixed Deposit aka term deposit is an instrument by which one can deposit his/her savings for a prescribed period of time with a bank. When the period of deposit elapses, the depositor is entitled to the interest on the deposited amount. In some cases, the rate of interest on fixed deposits can be as high as 9.5%!

The bankers view

For banks, fixed deposits (or term deposits) represent a loan arrangement. In simple terms, the money deposited through such investments shall earn a said amount as interest, as per the existing norms and guidelines set by the banking regulatory authority. The rate of interest on your fixed deposit is determined by many factors such as the location of the deposit, the duration for which the amount is deposited as also the currency involved in making the deposit.

The investors take

For starters, a fixed deposit is not a normal deposit that you do at your bank and then withdraw as and when you please. But, it is a deposit that cannot be withdrawn in the specified period. Generally, these types of deposits are made for a duration of 5 years. During this time, the amount remains in your bank account and is prohibited to be withdrawn for any reason whatsoever. Non-profit organizations, corporate entities, and individuals alike, who wish to keep aside a stipulated sum for a particular period of time, most often than not, find that such deposits are the easiest way in attaining their objective. The icing on the cake is their money will earn a rate of interest that is shielded by any fluctuations in the interest rates that govern other types of investments. Such deposits are a good (if not the best) way to gain a return on investment that is a tad higher than a conventional savings account.

Trust deposits

Deposits that are made “in the name of one person, as trustee for another” are branded as “trust deposits.”

Trust deposits are made for three basic reasons:

1) Pose for the disposition of a domain after demise sans the use of a will or administration,
2) Hide from others info of financial standing, or
3) Escalate deposits where a prescribed limit is set upon single deposits.

Lastly, fixed deposits offer investors a relatively safe avenue for parking their funds, albeit at the risk of earning a slightly lower return on investment. At the end of the day, it is up to the individual investor to decide for themselves whether they wish to pursue a high return-high risk approach or a relatively lower but largely safe investment approach.

Types of Companies offering Fixed Deposits

Financial Institutions
Non-Banking Finance Companies (NBFCs)
Manufacturing Companies
Housing Finance Companies
Government Companies

You can choose how frequently you want to receive your interest payments:

Maturity
Yearly
Half-yearly
Quarterly
Monthly