Fixed deposits are one of the safest savings modes available in the country. These are financial instruments in which you deposit a certain amount of money for a fixed tenure. Fixed deposits form a crucial part of any savings. The FD benefits are attractive when compared to other forms of savings available. A Fixed deposit provides you with the safety of your deposit and also the choice for planning short-term and long–term saving goals. FD rates are comparatively attractive than savings bank rates and hence, fixed deposits are the preferred choice for those looking for low-risk savings options. 

1. Enhanced Safety for Investors 

The pandemic has forced the financial sector to reduce the rate on the savings bank account. This has again spurred the interest of investors to look for FD benefits. One of the most crucial amongst them is the assured returns on your hard-earned money while the capital remains safe. Fixed Deposits of reputed institutions are provided with the highest ratings by credit agencies like CRISIL. 

2. Flexible Tenures

Companies also offer flexible tenures from 12 months to 60 months. Senior citizens get added benefits in the form of enhanced interest rates and thereby higher FD returns. FD benefits can also be cumulative or non-cumulative. In the cumulative fixed deposit, the interest rate is compounded and the benefits are paid at the time of the maturity of the plan. In non-cumulative plans, the payoffs are done on a monthly, quarterly, half-yearly, or yearly basis.

3. Attractive Interest Rates

FD rates are higher than the savings bank account interest rates. On completion of the term, an amount comprising the principal and the interest is payable to the investor. Institutions have the auto-renewal facility also for term deposits where your deposit is automatically renewed for another term with the same features.

4. Selection of the right institution

Fixed deposits are generally favored by the salaried class and also the senior citizens who give considerable importance to the safety of the deposit rather than more returns. In most cases, life savings are parked in these schemes. Hence extra caution needs to be exercised in the selection of the financial institution. It is noticed that small finance banks may be offering better interest rates care should be exercised to ensure that the institutions are covered under the Deposit Insurance and Credit Guarantee Corporation (DICGC) which insures the deposits.

5. Loan against FD

In the event of a financial emergency, you can take out a loan against your fixed deposit account. On a loan against a fixed deposit, banks typically charge interest rates that are 0.5 percent to 2 higher than the applicable fixed deposit interest rate. In the event of a financial emergency, you can borrow up to 90% of the value of your fixed deposit. This is an important consideration that needs to be factored in in the selection of the right institution. 

Fixed Deposits are investments that are preferred by individuals who wish to take a low risk of their hard-earned money. These types of investments provide guaranteed returns at the end of the tenure. In this period of reduced interest rates term deposits and fixed deposits for 6 months or more appear to be prudent investment options. While FD rates are the most important criterion, other factors also influence the investors in the selection of the institution. Safe online facilities offered by many institutions help the investors to choose and even amend their investment options from the comforts of their homes.

Preclosure of FD investments are also offered although on payment of penal charges. Although small finance banks may be offering better interest rates care should be exercised to ensure that the institutions are covered under the Deposit Insurance and Credit Guarantee Corporation (DICGC) which insures the deposits.