What Is Fixed Depoit

A fixed deposit (FD) is a type of deposit account provided by banks for a fixed tenure at a fixed rate of interest. In this scheme, the depositor keeps a fixed amount of money in an account known as FD account. The money is deposited only once at the time of account opening. At the end of the tenure, the interest amount is calculated on the principal amount and the total sum including interest is paid back to the depositor cumulatively. Fixed account earn higher interest rates than a regular savings bank account. 
Fixed Deposits are also known as ‘term deposits’ or ‘time deposits’. If you wish to deposit additional amount as fixed deposit, you need to open another FD account. Term deposits are considered safest investment option compared to other savings instruments. The duration of a fixed deposit may vary from as short as 1 day to 10 years. The rate of interest on Fixed Deposits is based on the tenure of fixed deposit and bank interest rates policies. Key features are:

• Can be opened by all residents, including minors and HUFs.
• Allows choosing 2 nominees in application form eligible to receive the FD amount after the death of the holder by submitting a valid death proof.
• Does not allow to withdraw deposit amount before maturity. Hence, encourages a depositor to save. Premature withdrawals from FD is allowed in emergencies by paying penalty.
• Banks also offer Sweep-in facility on term deposits which allows the depositor to interlink their savings bank account to fixed deposit account. This unique facility on FD facilitates the automatic transfer of surplus funds from savings account to FD account thus allowing you to earn FD rates on your savings with an option to break the FD anytime and use the amount for your expenses.
• You can also avail loans on your fixed deposits to meet any financial emergency. In loan against FD, your deposit is the security for the loan. Depending upon the bank, you would get a loan on your FD up to the extent of 75-95% of the FD amount which varies from one lender to another. Rate of interest on FD loans are 1%-1.5% higher than your FD rate.

Bank Fixed Deposits (FDs) are generally safe investments because FDs up to Rs 1 lakh are insured under the Deposit Insurance & Credit Guarantee Scheme of India.
Bank fixed deposits are one of the most preferred modes of savings for most of the Indians. Despite falling interest rates, people prefer to save money in fixed deposits because of its convenience and liquidity.