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In India, Fixed Deposits are one of the most popular ways to save money. They are a safe investment, offer good returns, and are easy to open.
So, what exactly is a Fixed Deposit?
In a Fixed Deposit, you put a lump sum in your bank for a fixed tenure at an agreed rate of interest. At the end of the tenure, you receive the amount you have invested plus compound interest.
FDs are also called term deposits.
Interest rates on FDs are fixed when you open the deposit and the rate depends on the term that you wish to hold it for.
where returns fluctuate over time, the returns on an FD are fixed when you open the account. Even if interest rates fall after you open a Fixed Deposit, you will continue to receive the interest decided at the start. FDs are considered much safer than investments in other assets like equity.
Your return on an FD will depend on the interest rate and the type of deposit you choose. You can opt for a monthly or quarterly pay-out of interest or the reinvestment option, which will give you the benefit of compounding. Check the HDFC Bank FD Interest Calculator to calculate your return on investment.
While FDs are fixed for an agreed tenure, you can take a loan against it when you need funds. HDFC Bank offers loans against FD in the form of an overdraft, and you can get up to 90% of your FD amount. The benefit is that your FD continues to earn interest, you don’t have to prematurely withdraw your FD, and end up paying a penalty.