Fixed Deposit, a type of term deposit, is a very popular investment choice in India due to its high interest rate (compared to regular savings accounts) and low risk. The interest rate remains fixed for the entire maturity period and is generally considered a very safe investment. Interest rates vary from bank to bank and the interest earned can be calculated as compounded, quarterly, monthly and standard.
Advantages of FD
■ Safer investment than comparable stock markets
■ Stable and predictable returns (e.g. 8.5% per annum)
■ Suitable for conservative investors like senior citizens
Limitations of FD
■ Low liquidity
■ Low returns as effective returns are low after considering taxes and inflation
■ Not suitable for very large wealth creation or investors with high risk appetite like young investors in their 20s or 30s
What is the interest rate on a bank FD for senior citizens?
Currently, senior citizens earn around 0.50% to 0.60% higher interest rate depending on the tenure chosen.
How is the interest on a bank FD calculated?
The interest earned on a bank FD of less than 6 months tenure is calculated on simple interest and is calculated on the number of days.
Whereas the interest earned on FD of 6 months tenure or more tenure is compounded quarterly i.e. the interest earned in the previous quarter is added to the principal to calculate the interest.
For the monthly interest payment option, the interest given will be calculated at a discount rate over the standard rate. If you choose the quarterly payment option, the interest is calculated and paid quarterly.
What is the minimum tenure of a fixed deposit with your bank?
The minimum tenure of your bank FD may be as low as 7 days.
Disclaimer:
All the information given here may not be completely accurate with your bank. These figures are subject to change over time, so please do your own research. Our personal opinions are given here and we do not in any way advocate investment.