Definition and Purpose

• A fixed deposit (FD) account is a type of term investment offered by banks and financial institutions.
• It allows individuals to deposit a lump sum amount for a fixed period at a predetermined interest rate.
• The primary goal is to earn higher returns compared to a regular savings account.
• Funds remain locked in for the chosen tenure and earn interest throughout.
• It is considered a safe and low-risk investment option.

Interest Rates and Tenure Options

• Interest rates on FDs vary by bank and depend on the deposit amount and tenure.
• Tenures can range from 7 days to 10 years, with flexible options.
• Longer durations usually offer higher interest rates.
• Senior citizens often receive an additional interest rate benefit.
• Interest can be compounded quarterly or paid out monthly, quarterly, or annually.

Deposit and Withdrawal Conditions

• A minimum deposit amount (often ₹1,000 or more) is required to start an FD.
• Premature withdrawal is allowed but may attract a penalty or reduced interest.
• Some banks offer partial withdrawal or sweep-in options for liquidity.
• On maturity, the principal and interest can be withdrawn or reinvested.
• Auto-renewal options are available for convenience.

Types of Fixed Deposit Accounts

• Standard FD: Traditional fixed deposit with fixed tenure and rate.
• Tax-Saving FD: Offers tax benefits under Section 80C with a 5-year lock-in.
• Cumulative FD: Interest is paid at maturity, compounded over time.
• Non-Cumulative FD: Interest is paid at regular intervals (monthly or quarterly).
• Flexi or Sweep-In FD: Linked to savings/current account with automatic transfer.

Benefits and Suitability

• Provides guaranteed returns regardless of market fluctuations.
• Ideal for conservative investors seeking stable income.
• Encourages disciplined savings by locking in funds.
• Supports short-term and long-term financial goals.
• Suitable for emergency fund parking, retirement savings, or planned expenses.