What is Fixed Deposit (FD)?

FD stands for Fixed Deposit. It allows you to invest a lump sum amount for a specific tenure, earning interest over time. In India, fixed deposit are a widely preferred savings option. They offer guaranteed returns, low risk, and flexible tenures, making them ideal for conservative investors looking for steady growth and capital protection.

• Fixed deposits offer stable returns with predetermined interest rates, unaffected by market fluctuations, ensuring financial safety.
• Investors can choose from diverse FD types and tenures, catering to short-term or long-term goals, with payout flexibility.
• Bajaj Finance FDs provide an easy online application process, high credit ratings, and competitive interest rates for secure investments.

A Fixed Deposit (FD) is a financial instrument offered by banks and non-banking financial companies (NBFCs), where you deposit a lump sum amount for a fixed tenure at a predetermined interest rate. The interest earned is higher than that of a regular savings account. At maturity, you receive the principal along with accumulated interest. FDs are popular for their safety, guaranteed returns, and flexible investment periods.

Fixed Deposits (FDs) provide a secure avenue for growing your savings. With an FD, you invest a lump sum amount for a specific period, ranging from a short 7 days to a longer 10 years. The interest rate you earn on your FD is predetermined and remains fixed throughout the tenure, ensuring guaranteed returns regardless of market fluctuations. The longer the tenure you choose, the higher the interest rate you'll typically receive.

Interest earned on your FD is usually paid out at maturity. You can choose to have it directly credited to your linked savings account for immediate access or opt for it to be reinvested into your FD to accumulate over time.

Fixed deposits offer several advantages that make them a popular investment choice:

• Guaranteed returns: An FD ensures fixed interest earnings, irrespective of market fluctuations, providing stability and financial certainty.
• Low-risk investment: Since FDs are not market-linked, they carry minimal risk, making them suitable for investors with a low risk appetite.
• Flexible tenures: FDs offer a wide range of investment durations—from 7 days to 10 years—allowing you to align them with your financial goals.
• Better interest than savings accounts: FD interest rates are typically higher than those offered by standard savings accounts, enabling your funds to grow more efficiently.
• Loan facility: You can avail of a loan against your FD, typically up to 90% of the deposit value, ensuring liquidity without breaking the deposit.
• Senior citizen benefits: Many banks and NBFCs offer higher FD interest rates for senior citizens, supporting their retirement planning.
• Auto-renewal option: Most financial institutions allow auto-renewal of FDs at maturity, helping investors maintain continuity without manual intervention.
• Premature withdrawal: Some FDs allow early withdrawal with minimal penalties, offering flexibility in case of emergencies.
• Tax-saving FDs: Certain FDs with a 5-year lock-in period qualify for tax deductions under Section 80C of the Income Tax Act.
• Nomination facility: You can assign a nominee for your FD, ensuring smooth fund transfer in the event of unforeseen circumstances.
• Wide accessibility: FDs can be easily opened online or offline across banks, NBFCs, and post offices, making them highly accessible for all types of investors.

Different categories of fixed deposits include:

1. Standard term deposits

This is the most common type of FD available at all banks. You deposit a fixed amount of money for a specific tenure, and the bank pays you interest on it at regular intervals or at maturity. The interest rate is pre-determined by the bank and varies based on the tenure and amount invested.

2. Senior citizen fixed deposits

These are FDs designed specifically for senior citizens. FD for senior citizen offer higher interest rates than standard FDs and are available to individuals aged 60 years and above.

3. Flexi fixed deposit

This is a type of FD that allows you to withdraw money from your account without breaking the FD. You can withdraw up to a certain limit without incurring any penalty, and the interest rate is calculated on the remaining balance.

4. Recurring deposit

This is a type of FD where you deposit a fixed amount of money at regular intervals (usually monthly) for a specific tenure. The interest rate is pre-determined by the bank and varies based on the tenure and amount invested.

5. Tax-saving FD

A Tax-Saving Fixed Deposit (FD) is a type of fixed deposit account that offers a tax deduction under Section 80C of the Income Tax Act, 1961 1. Any investor can claim a deduction of a maximum of Rs. 1.5 lakh per annum by investing in a tax-saving fixed deposit account. The lock-in period for this type of FD is 5 years, and the interest earned is taxable.

1. Cumulative FD

In cumulative FD, the earned interest is reinvested in the FD account. Both the principal amount and the accumulated interest are paid out at the end of the tenure. This suits investors seeking higher returns without the need for regular interest payouts.

2. Non-cumulative FD

Under this FD type, the earned interest is paid to the investor periodically such as monthly, quarterly, half-yearly, or annually, based on their preference. It is suitable choice for investors looking for a steady income stream.

Calculating interest on fixed deposits is simple, considering the investment amount, interest rate, and investment duration. The basic formula is:

Interest on FD=Amount Invested × Interest Rate × (Duration/12 months)

However, the interest amount varies based on whether you opt for a cumulative or non-cumulative FD. For example, let's consider investing Rs. 50,000 for 5 years at an annual interest rate of 8.5% p.a. In this scenario, a cumulative FD would yield a maturity value of Rs. 76,140.

Fixed deposit is a popular investment option for various reasons. It offers fixed returns, minimal risk, flexible tenure, tax benefits, and easy liquidity. FDs are suitable for a wide range of investors depending on their financial objectives and investment portfolio. Here are the types of investors who should invest in fixed deposits:

1. New investors

FDs are an idea investment option for new investors interested in learning about fixed income instruments. These investors can start with small investments and gradually increase their holdings.

2. Retirement planning

People looking for a low-risk option to create a retirement corpus can invest in fixed deposits. This investment provides retirees with a regular and guaranteed income stream and protects their savings from market fluctuations.

3. Conservative investors

FDs are an ideal choice for investors who prefer safe and low-risk investments. Conservative investors want to avoid fluctuations in returns that come with riskier investment products.

4. Short-term goals

Investors with short-term goals can invest in fixed deposits to achieve their financial objectives. FDs offer flexible tenures from a few days to a few years. Investors can use the interest earned on the investment to meet their short-term financial goals.

5. Emergency funds

FDs are a useful investment option to set aside emergency funds. They provide higher interest rates than savings accounts and offer easy liquidity with premature withdrawal.

Here are some key features of Bajaj Finance Fixed Deposit:

1. High FD rates

Bajaj Finance offers one of the highest FD rates in the market, ranging from 6.41% p.a. to 6.95% p.a. for regular customers and up to 7.30% p.a. for senior citizens, depending on the tenure of the deposit. This means that you can earn higher returns on your investment without taking on any additional risks.

2. Flexible tenures

Bajaj Finance Fixed Deposits offer flexible tenures ranging from 12 to 60 months. This means that you can choose a tenure that suits your investment needs and goals. Whether you want to invest for a short-term or a long-term period, Bajaj Finance has got you covered. You can also opt for a cumulative FD, where the interest is compounded annually and paid out at maturity. In a non-cumulative FD, the interest is paid out monthly, quarterly, half-yearly or annually.

3. Easy online application

Bajaj Finance offers an easy online application process for opening a fixed deposit account. You can visit the Bajaj Finance website, fill out the application form, and upload the necessary documents. Once your application is approved, you can transfer the funds online, and your fixed deposit account will be opened instantly. This saves you time and hassle of visiting a bank or a financial institution to open an FD account.

4. Highly rated by credit rating agencies

Bajaj Finance Limited is rated CRISIL AAA/ STABLE and [ICRA]AAA(Stable). This indicates the highest degree of safety and stability regarding the timely payment of interest and principal on fixed deposits. This means that your investment is in safe hands, and you can be assured of timely payments of interest and principal.

Also read: TDS on FD interest

Bajaj Finance offers some of the highest FD rates, up to 7.30% p.a., and you enjoy high investment safety here because of the highest credit ratings - CRISIL AAA/STABLE and [ICRA]AAA(Stable). You can invest for a flexible tenure and start with a sum of just Rs. Rs. 15,000. By investing in a Bajaj Finance FD, senior citizens can also reap interest rate benefits up to 0.35%  p.a. on their deposits.

In India, various entities and individuals can open a Fixed Deposit (FD) account. Below are the eligible categories, explained in detail:

1. Indian nationals
   Any individual holding Indian citizenship, whether residing within the country or abroad, can open an FD account. This includes salaried employees, self-employed individuals, and homemakers, among others.
2. NRIs
   Non-Resident Indians (NRIs) can invest in FDs through specific schemes like NRE or NRO accounts, enabling them to earn interest while maintaining foreign or rupee-denominated deposits.
3. Minors
   Individuals under 18 can open an FD account with the help of a guardian. These accounts promote early savings and financial planning.
4. Elderly people
   Senior citizens benefit from special FD schemes offering higher interest rates to support their financial needs post-retirement.
5. Company partnerships
   Partnership firms can invest surplus funds in FDs for better returns while maintaining liquidity for business operations.
6. Companies
   Registered companies use FDs to earn fixed returns on their excess funds, balancing profitability with financial stability.
7. Clubs and societies
   These non-profit entities invest in FDs to ensure the safe growth of their reserved funds for future projects or expenses.
8. Single-person business
   Sole proprietors can open FDs to utilise idle funds effectively, securing a fixed income stream.
9. Investors (alone or in groups)
   Individuals or groups seeking stable returns often choose FDs to diversify their portfolio and manage risk.