Demand Deposit vs Fixed Deposit

In summary

Demand deposits and fixed deposits serve different financial purposes.

• Liquidity: Demand deposits allow withdrawals whenever funds are needed.
• Tenure: Demand deposits have no fixed maturity, while FDs have defined tenures.
• Returns: Fixed deposits generally offer higher returns than savings-based demand deposits.
• Access: Demand deposits support frequent transactions through banking channels.
• Purpose: FDs suit planned investments, while demand deposits suit regular financial needs.

The right option depends on your liquidity requirements, investment horizon and return expectations.

What is fixed deposits?

A fixed deposit (FD) is a financial product where you invest a lump sum for a chosen tenure. The deposit earns interest according to the applicable rate and payout option. At maturity, you receive the principal along with the applicable interest. Depending on the FD, interest can be paid periodically or accumulated until maturity. Bajaj Finance offers FD tenures ranging from 12 to 60 months. The minimum deposit is Rs. 15,000, while the maximum is Rs. 3 crore. Senior citizens can receive an additional interest rate of up to 0.35% p.a. The applicable FD interest rate depends on the selected tenure and customer category.

Also Read: How to break your FDs before maturity

What is demand deposits?

Demand deposits are bank deposits that customers can withdraw when required. They are designed primarily for liquidity and regular financial transactions. Savings accounts and current accounts are common examples of demand deposit accounts. Customers can generally access these funds through ATMs, debit cards, cheques and digital banking channels. Unlike fixed deposits, demand deposits do not have a predetermined maturity date. Interest rates depend on the type of account and the financial institution.

Differences between demand deposit and FD

Both demand and fixed deposits can serve different financial objectives. The key differences relate to access, tenure, returns and flexibility.

1. Tenure

Demand deposits do not have a fixed investment tenure. You can generally continue using the account as long as it remains active.

Fixed deposits have a predetermined tenure and maturity date. Bajaj Finance FDs currently offer tenures between 12 and 60 months.

2. Withdrawal procedures

Demand deposits allow customers to access funds when required. Withdrawal methods depend on the account and available banking facilities.

Fixed deposits are designed for investment until maturity. Premature withdrawal may be permitted, subject to applicable terms and reduced interest.

3. Rate of interest

Demand deposit interest varies according to the account type and institution. Current rates should be checked with the respective bank or financial institution.

FD interest rates are generally predetermined for the selected tenure. Bajaj Finance offers FD interest rates of up to 7.75% p.a. for non-senior citizens and up to 7.75% p.a. for senior citizens.

4. Flexibility

Demand deposits provide greater flexibility for regular transactions and withdrawals. They are suitable when funds may be needed frequently.

Fixed deposits provide less liquidity because funds are committed for a selected tenure. However, they provide greater predictability of returns than accounts designed for daily transactions.

Also Read: Fixed Deposit Checklist

Demand deposits and fixed deposits are designed for different financial requirements. Demand deposits prioritise accessibility, liquidity and regular banking transactions.

Fixed deposits focus on planned investing for a predetermined tenure. They can help investors earn predictable returns without exposing their principal to market-linked fluctuations. Choose between them based on your liquidity requirements, investment horizon and financial objectives.