Fixed Deposit

What are Fixed Deposits (FDs)?

By investing in form of deposits in banks or companies, investors can earn a fixed return quoted

on such deposits by the banks or companies. These types of investments are Fixed Deposits.

Fixed Deposit is one of the safest forms of investment carrying zero risk.

Types of FDs:

(i) Bank Fixed Deposits:

The tenure on Fixed Deposits in banks ranges from 7 days to 5 years. Interest on these fixed deposits depends on tenure.

(ii) Corporate Fixed Deposits:

Deposits under Corporate FDs are governed by Section 58A of Companies Act.

Who can invest in FDs?

  • Every resident Indian or NRI
  • Trusts
  • Charitable Institutions
  • Schools
  • Partnership firms/LLP
  • Companies
  • HUFs

Withdrawal of funds invested in FDs:

On Maturity:

The investor will get the whole amount as committed by the banks or companies on the maturity of FDs. The interest paid on such FDs is generally compounded rate of interest.

Pre-Mature Withdrawal:

If the funds are withdrawn before the maturity of the instrument then the investor will get somewhat lesser amount instead of the promised amount by those financial institutions.

Features of FDs:

  • Tenure of investment in FDs starts from minimum 7 days upto 10 years
  • Rate of interest on FDs depends on financial institutions and the tenure for which the amount is invested
  • Senior citizens get slightly higher rate of interest on FDs
  • Interest on FDs is generally compounded

Frequently Asked Questions:

1.On what basis Corporate FDs be selected for investment?

The investor should see the credit ratings given by various credit rating agencies like CARE, ICRA, Moody’s etc. the companies having rating A and above are considered to be less risky.

2.What is the interest rate offered on Corporate FDs?

Corporate FDs generally yield higher returns than banks. Corporate FDs are unsecured and are generally for shorter duration.

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