Home Investments Fixed Deposit What is Fixed deposit? How to open fixed deposits account?

What is Fixed deposit? How to open fixed deposits account?

What is Fixed deposit?

Fixed deposit (FD) is a type of deposit offered by banks which gives its customers with a higher interest rate for this deposit, which is greater than usual savings account, with a given maturity date.

You might be having some cash or some property sold offs or might be some insurance benefits. You are not planning to spend it today rather decide to save. Money in bank doesn’t give good return while lending it to some friend might be risky. For such situations we have a fixed deposit.

Fixed deposits work in a very simple way. You deposit an amount as a fixed deposit and lock it in there for a defined term. You will get the money plus some interest, more than bank account’s interest, after the end of the term. Fixed deposits are considered as a very good medium term financing instrument. A fixed deposit can be opened at a bank or a financial institution or even in a company.

Features of Fixed Deposit Account:

Main purpose of fixed deposits is to provide higher interest on the surplus.
Amount can deposited only once. For further deposits, separate fixed deposit accounts have to be opened.
The interest proceedings can be channelled to the saving accounts or the same can be reinvested to the fixed deposit.
Interest payments are applicable to tax deductions.
Duration of a FD can be form 7 days to 10 years.
All residents including the minors can open up an FD account.
The interest charges can vary from 7% to 11%.
The deposit can be encashed on the maturity or can be deposited for further term. Partial withdrawal or pre matured withdrawal attracts penalty.

Fixed deposits have many other provisions also. If you require money urgently but do not want to lose penalty amount on FD, a loan can be taken on the deposits. NRIs are also allowed to open fixed deposits by special provisions.

Opening up of a Fixed Deposit:

As equity markets are discovering how far they can fall, the popularity of fixed deposits is increasing. And if such similar thought has crossed your mind too, please consider below mentioned information about opening a fixed deposit.

Minimum deposit varies from bank to bank but is generally around Rs 10,000. It is not necessary to have a savings account before opening up a FD account but is beneficial. It does not only provide smooth transactions but also reduce the paper works and other filings.
In order to open a fixed deposit, one needs to fill up the form and submitting the documents. Documents required are identity proof (passport, PAN card, driving licence etc), address proof, a signature proof (passport, PAN card or even a signed cheque) and for senior citizen benefit, proof of age.
The same procedure is there for opening up a company deposits.

This shows that opening up of a FD is very simple and the benefits are very satisfactory. Thus try to open up a FD in your bank branch as a medium term investment and reap its full benefits.