A Fixed Deposit is 

a safe investment through which you can earn interest income. Fixed
Deposits promise guaranteed returns and involves no risk of loss of principal amount. Returns on
Fixed Deposits are unaffected by market fluctuations. All interest gains from Fixed Deposits are
taxable by law.

Fixed deposits are an investment instrument provided by banks and other financial institutions
such as non-banking financial institutions (NBFCs) and housing finance companies (HFCs).
Under this, investors would deposit a lump sum over a period. In turn, they would get a fixed
rate of interest throughout the investment. The rate of interest provided on FDs is much higher
than that of a regular savings bank account. Once the tenure of the deposit ends, investors can
withdraw their investment. However, they have a choice of reinvesting their money for another
term.

Features of Fixed Deposits

The following are the key features of fixed deposits:

● The investment tenure of FDs ranges from one day to several years, and it varies across
banks

● The return on investment is compounded periodically, and it may be monthly, quarterly,

or annually

● Senior citizens are provided with slightly higher returns (0.5% higher)

● Partial or full withdrawals are permitted (with penalties)

● Taxpayers can invest in tax-saver FDs to save taxes under Section 80C

● Once the investment matures, investors can reinvest for another term

● Loan against FDs are available

● Investors will accumulate higher returns if they invest for a more extended period

Benefits of Fixed Deposits

● Returns are assured as they are not tied with the market

● At times of financial emergencies, one can avail a loan against their FDs

● Investment is safe as banks and other financial institutions are always under the purview
of the Reserve Bank of India (RBI)

● Compounded interest makes your investment grow at a much faster rate

● Premature withdrawals are allowed, so you will always have a corpus to fall back on at
times of crisis

How to Open FD?

Fixed deposits can be opened both online and offline: Online:
● Log in to the selected bank account
● Search for ‘fixed deposit’ option
● Select ‘open FD’ option
● Duly fill the online application form
● Upload all the requested documents
● Transfer the amount you would like to invest

Offline:
● Visit the nearest branch of the bank or financial institution
● Duly fill the offline application form
● Attach the requested documents with the application form and submit
● Provide a cheque for the amount that you would like to invest
Recurring deposit
A recurring deposit account enables an individual to deposit fixed amount every month
for a pre-defined period which earns interest similar to Fixed Deposits (FD). RDs can
be availed by senior citizens as well. The interest rates for senior citizens deposits are
higher than the regular account.

Features of Recurring Deposit

● Open an RD account by investing a minimum of Rs.100 per month.
● The minimum deposit tenure for RD accounts is six months and can go up to 10 years.
● RD accounts offer an interest rate higher than that of a savings account.
● Generally, banks compound the interest once every quarter.
● RD accounts come with a lock-in period of 30 days-3 months subject to the bank’s
discretion. Withdrawal within the lock-in period will not fetch any interest.
● A single account holder can open any number of RD accounts.
● Advance deposits are allowed by a few banks and by the Post Office.
● Partial withdrawals are not allowed.
● Premature withdrawals are allowed subject to a penalty.
● Make monthly payments instead of a lump sum payment as in the case of fixed deposits.
● Set standing instructions so that the installments are automatically deducted from your
savings account without the need for manual interaction.
● Senior citizens may get an additional 0.5% interest rate.
● RD accounts can be opened in the name of minors; however, only under the supervision of
parents/guardians.
● Overdraft or loan facilities are available on RD balance.

Advantages of RD Accounts

● Inculcates the habit of saving.

● Penalty is not imposed if you miss the RD instalment for a month.
● Expect an interest rate that is higher than that of a savings account.
● It takes as low as Rs.100 to start a recurring deposit account.
● Hassle-free RD account opening process, especially so if you already have a savings
account with the bank.
● Simple documentation process. Existing members need not submit any documentation
mostly.
● Great savings option to attain your short-term goals.

How to Open an RD Account?

You can open an RD account either online or offline at the bank branch.
Online Application:

● Log into your net banking or mobile banking account.

● Select the ‘Open an e-RD Account’ option on the dashboard.

● Specify the account number from which you wish the instalment to be debited, the
instalment amount you prefer, and the period. Check the interest rate applicable and
mention the nominee for the account proceeds.

● Click on the checkbox to confirm that you agree to all the terms and conditions after
checking the maturity amount.

● Submit the application. A confirmation message will be displayed, and an email will be
sent to the registered email address with the RD receipt. The set amount will get debited
from the specified amount.

Offline Application:

● Visit the nearest bank branch where you already have a savings account.

● Fill up the RD application form and specify the details, such as instalment amount, mode
of payment, deposit tenure, nominee, and other details.

● Pay the money for the first instalment through a cheque/cash.

● The bank representative will process your application within the stipulated time.