Fixed Deposit (FD) News 2024: Fixed Deposit (FD) is one of the most popular savings instruments in India. It gained more popularity in 2023 as banks increased interest rates. As of December 2023 end, several small finance banks were offering over 9% annualized interest on FDs. 

According to Reserve Bank of India’s Annual Report 2022-23, more than Rs 102 trillion is currently locked in around 24.23 million FD accounts in India.

This number is 5x more than the amount held in current accounts (Rs 18.5 trillion) and around 1.7x higher than the amount held in savings accounts (approx Rs 181 trillion).  

FD account opening facility is offered by banks and other financial institutions. Also known as Time Deposit and Term Deposit, FD offers flexibility and convenience to investors. There are several other factors that attract individuals to the FD scheme. However, it is not considered as an efficient tool for wealth generation. Read on to know everything about FD scheme in 2024

Types of Fixed Deposit

Financial institutions offer several types of FD accounts in India. Before opening an FD account, you should know how all these accounts differ from each other. Here’s a quick guide: 

Regular/Standard FD

In a regular FD account, you can invest any amount for a certain period and receive the principal amount as well as the interest earnings on maturity. 

Callable FD

Callable FD accounts allow premature withdrawals. In a callable fixed deposit account, depositors are allowed to withdraw the whole amount or a part of their deposits before the maturity of the account. 

Also Read: Health Insurance Plans for Senior Citizens in India: Full List 

Non-callable FD 

Non-Callable fixed deposit accounts do not allow premature withdrawals. In a callable fixed deposit account, depositors are not allowed to withdraw the whole amount or a part of their deposits before maturity of the account.

Senior Citizen FD Account

Senior Citizen Fixed Deposit Account is available for senior citizens aged above 60 years. Banks usually offer additional interest to fixed deposits. 

Tax Saving FD

Tax Saving Fixed Deposits are 5-year FD accounts that allow tax deduction under Section 80C of the Income Tax ACT. 

Corporate FD Account

Corporate Fixed Deposit accounts are offered by companies that are not banks. It is also known as company FD. While company FDs often provide higher interest rates, they are considered riskier than regular bank FDs. 

Cumulative FD

In a cumulative fixed account, the interest is compounded on a quarterly, half-yearly or yearly basis. However, the interest income is paid at the time of maturity. 

Non-Cumulative FD

In a non-cumulative fixed account, the interest income is paid on a monthly, quarterly or half-yearly basis. This type of FD is suited for individuals looking for a regular source of income through fixed deposit. 

Flexi FD/Sweep-in FD

Several banks are offering Flexi Fixed deposit/Sweep-in FD accounts where money moves between savings and FD accounts. This type of FD account is linked to the savings account. 

NRO FD

NRO Fixed Deposit account is offered by banks to non-resident Indians. This type of account can be used by NRIs to deposit their income generated in India. 

NRE FD

NRE Fixed Deposit accounts in India can be used by NRIs to deposit their income generated abroad. 

Expert’s take: Should you invest in FD? 

While FDs offer guaranteed return and safety of your money, post-tax return from FD is usually low. Financial planners advise individuals to use FD accounts to park their emergency funds or the amount that they can’t afford to lose. However, not everything invested in a FD account is guaranteed (see below). 

How much money is guaranteed in Fixed Deposit

Invested amount plus interest earned up to Rs 5 lakh in a bank guaranteed under RBI’s Deposit Insurance and Credit Guarantee Corporation (DICGC) rules. The DICGC provides insurance coverage for deposits up to Rs 5 lakh. This coverage is applicable to FDs as well as savings, current accounts, recurring deposit accounts and savings accounts. Investors should note that DICGC cover is available for scheduled commercial banks only. Company FDs are not covered. 

Fixed Deposit Interest Rate

FD interest rate is decided by banks and companies. FD rate is usually affected by RBI policy rates. Generally, FD rates go up when RBI increases the repo rate. 

Pros and Cons of Fixed Deposit

FD Account: Eligibility

FD accounts can be opened online as well as offline by visiting a bank’s branch. FD accounts can be opened by Resident Indians, Two or more investors in a joint account, senior citizens, NRIs, minors, societies/clubs, companies, partnership firms, sole proprietorships etc. 

Tax on FD: How is FD income taxed?

Interest income from fixed deposits is fully taxable at applicable slab rates. However, investors can claim deduction under Section 80C if investing in a 5-year Tax Saver FD scheme. 

How loan against Fixed Deposit works

Fixed deposit investors can avail loan against their investment. The quantum of loan varies from bank to bank. The interest rate for loans against FD is generally lower than other types of loans. Also, the repayment period of such loans is limited to the maturity period of the deposit. 

You can learn more about Fixed Deposits and ways to bring perfection to your Personal Finance journey here