What Is A Fixed Deposit In Banking? Explained | Business News

Last Updated:July 09, 2025, 11:09 IST

It is a low-risk investment that offers a guaranteed return, making it a popular alternative for consumers seeking consistent and predictable income.

FDs are considered one of the safest investments in India.

(Representative Image)

In India, Fixed Deposits (FDs) are widely regarded as one of the safest and most reliable ways to save money. Offered by banks and financial institutions, FDs involve depositing a lump sum amount for a fixed tenure at a predetermined interest rate. This low-risk investment guarantees returns, making it a popular choice among individuals looking for stable and predictable income. FDs are also easy to open and manage, adding to their appeal as a secure savings option.

Take a look at some of its key features:

Fixed Interest Rate

The interest rate on an FD is fixed at the time of deposit and remains constant throughout the chosen tenure. This fixed interest rate is typically determined based on the deposit amount and the duration. This ensures that the investor will get guaranteed returns on their investment.

Low-Risk Investment

Unlike market-based investments, which fluctuate over time, the returns on an FD are fixed when you create the account. Even if interest rates fall after you open a Fixed Deposit, you will continue to receive the interest rate you chose at the beginning. FDs are considered significantly safer than other types of investments, like as stocks or mutual funds.

Flexible Tenure

Investors have the option to choose the tenure that suits their financial goals. It can range from a few days to even 10 years.

Loan Against FD

While the FD amount remains locked in for a fixed period, investors can avail of a loan against it in times of urgent financial need, typically up to 90% of the deposited amount.

Senior Citizen Benefits

To support Senior Citizens for their retirement planning, several Banks and NFBCs offer higher FD interest rates.

Premature Withdrawal

Some banks and NFBCs allow early withdrawal of the amount with some minimal penalties.

There are different types of Fixed Deposit accounts in India:

Standard

These are the most common types of Fixed Deposit, offering fixed interest rates for a specific period.

Tax-Saving FDs

These provide tax benefits under Section 80C of the Income Tax Act, but normally have a 5-year lock-in period.

Senior Citizen FDs

These are specifically designed for senior citizens and offer higher interest rates than standard FDs. It is only available for people aged 60 years and above.

Flexi FD

These combine the characteristics of savings and fixed deposits, allowing for partial withdrawals and higher interest rates than conventional savings accounts.

Recurring Deposit

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

In India, an FD account can be opened by visiting the Bank’s branch or via online banking services.

Business Desk

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A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al… Read More

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Delhi, India, India

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