Demand Deposit vs Fixed Deposit

Understand the difference between demand deposit and fixed deposit.
Demand Deposit vs FD
3 min

People often get confused when comparing demand deposit vs FD. Demand deposits and FDs are savings schemes offered by many financial institutions. They are some of India’s most popular and traditional investment options. It is crucial to understand both options clearly to make a wise choice that suits your needs.

What is fixed deposits?

A fixed deposit (FD) is a popular investment option in India. You deposit a lump sum for a set period, earning a fixed interest rate that makes FDs a low-risk choice. Your interest usually compounds, allowing your money to grow faster. At the end of the term (maturity), you receive the initial deposit plus the accumulated interest.

Also Read: How to break your FDs before maturity

What is demand deposits?

Demand deposit accounts offer higher liquidity and ease of access compared to term deposits. However, they pay lower interest rates. They may also include numerous fees for handling the account. Depositors can withdraw parts or all of the funds in a demand deposit account at any given time without incurring a penalty or giving prior notice, although some banks may charge a small fee if their limit of monthly withdrawals is exceeded.

Differences between demand deposit and FD

Both demand and fixed deposits come with their share of benefits and drawbacks. These investment option are ideal for risk-averse investors looking to diversify their portfolios.

  1. Tenure: There is no specified tenure for a demand deposit. Hence, it is more suitable for individuals who frequently need to access their money for various financial activities. Fixed deposits are tenured deposits that have a set maturity date. The main purpose of a fixed deposit is to provide individuals with a secure place to invest their money for a set period and at a set interest rate.
  2. Withdrawal procedures: Demand deposits can be accessed at any time without any obligations, whereas fixed deposits can only be accessed after maturity. Moreover, fixed deposits may incur penalty charges if they are withdrawn before their maturity date.
  3. Rate of interest: The interest rate for a demand deposit ranges between 4% and 6%, based on the institution you choose to invest your money in. On the other hand, the rate of interest on a fixed deposit can range from 5% to 10% per annum. The interest rate and compounding of accrued interest for fixed deposits can vary from one financial institution to the other. You can consider investing in Bajaj Finance Fixed Deposit as they one of the highest returns of up to 8.85% p.a.
  4. Flexibility: Flexibility is higher in demand deposits compared to fixed deposits. Once a fixed deposit account has been opened, individuals typically cannot add or withdraw money without incurring extra charges. The specific interest rate on a fixed deposit may also be locked for the set period.

Also Read: NBFC FD interest rates

Also Read: Fixed Deposit Checklist


A demand deposit is a transactional account intended for daily banking needs, offering immediate access to funds through debit cards, cheques, and online transfers. On the other hand, a fixed deposit is a tenure deposit that involves a fixed duration and offer higher interest rate. It requires the depositor to lock in their capital for a specific period, restricting access until maturity.

Fixed deposits are best suited for investors who seek secure returns over a fixed period, whereas demand deposits prioritise convenience and liquidity for frequent transactions.

Frequently asked questions

What is the Digital FD offered by Bajaj Finance?

Bajaj Finance has launched a new FD type called "Bajaj Finance Digital FD" for a period of 42 months. Bajaj Finance is providing one of the highest interest rates of up to 8.85% p.a. for senior citizens and for the customers below the age of 60 they are providing up to 8.60% p.a. The Digital FD can be booked and managed only through the Bajaj Finserv website or app.

What is better? Demand deposit or fixed deposit?

A demand deposit allows you to withdraw funds anytime, whereas a fixed deposit involves a lock-in period. You can consider a demand deposit account if you have immediate financial requirements or a fixed deposit account if you want to save for the future.

What is the time period for which I can invest in demand deposit?

With a demand deposit account, there is no time period for which you can invest your savings. This type of account allows you to invest or withdraw funds at any time without incurring any penalty. However, some banks may charge a fee if you exceed a certain number of withdrawals.

Is demand deposit safe?

Yes, a demand deposit is a safe option. Not only does it allow you to store your money safely in a bank but also provides convenient access to it whenever needed.

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As regards deposit taking activity of Bajaj Finance Ltd (BFL), the viewers may refer to the advertisement in the Indian Express (Mumbai Edition) and Loksatta (Pune Edition) furnished in the application form for soliciting public deposits or refer
The company is having a valid Certificate of Registration dated March 5, 1998 issued by the Reserve Bank of India under section 45 IA of the Reserve Bank of India Act, 1934. However, the RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

For the FD calculator the actual returns may vary slightly if the Fixed Deposit tenure includes a leap year.