Brief Notes on types of Fixed Deposit

A fixed deposit is a type of savings account that banks and other financial organisations provide. It is a method of long-term savings with the added benefit of being able to access your money when you need it. Unlike a traditional savings account, the money you deposit is not immediately accessible for withdrawal; nevertheless, you will receive a set interest rate on it, which may be incredibly profitable.

Fixed Deposits (FD)

A fixed deposit is a type of bank account that provides a competitive interest rate in return for the account holder maintaining their money in the account for a certain amount of time. Fixed deposits are an excellent method for savers to put their money to work, giving a decent return without the danger of investing in stocks and other higher-risk investments. Fixed deposits are a safe and secure method to save for a down payment on a house, car, or other large purchase, as well as to offer a secure retirement fund. They are also one of the finest methods to pass money down to the next generation since they provide a good return while keeping the money secure until the user is ready to utilise it.

The Benefit of opening a Fixed Deposit Account 

The fundamental advantage of a fixed deposit would be that the money is assured, safe, and simple to access. The fixed deposit account interest rates are not lower than 5 percent, hence there is a higher metric of probability of a profit. The money is guaranteed since the bank is obligated by law to maintain the deposit in the case of the bank’s closure; however, the return is not guaranteed. The deposit is safe since it is housed in a bank account, which is safeguarded by the bank’s vault and security system. The money is also easily accessible since the deposit is usually stored in the same bank account as the other money in the account, which means that it is usually ready for withdrawal or transfer to another account without any need for numerous trips to the bank.

The second advantage of having a fixed deposit is that your money earns a fixed deposit account interest rate regardless of the fluctuating market. This means that even if interest rates on other savings accounts fall, your fixed deposit will still provide a good return. This is a far safer alternative than investing in stocks or other higher-risk investments, which can be dangerous. However, it does imply that the return on your investment will be lower than if you had invested in a riskier commodity.

Types of Fixed Deposits

There are several sorts of fixed deposits, each with its own set of benefits and drawbacks. Savings certificates, recurring deposits, and repeating credit are some of the most frequent forms of fixed deposits. Other forms of fixed deposits include fixed deposits for modest savings, fixed deposits for retirement, and fixed deposits for infrastructure development. Each of these fixed deposit options has something unique to offer and may be tailored to meet individual needs. The most opted types of fixed deposits offered by SBI are stated below- 

1. Standard Fixed Deposits 

A standard fixed deposit (sometimes known as a bank fixed deposit) is a fixed deposit issued by a commercial bank. The interest rate on a fixed deposit is determined by the bank and is usually fixed for the life of the account or for a defined length of time. The fd interest rates in sbi for Standard fixed deposits range from 6 percent for 3 years of the deposit for senior citizens and around 5.5 percent from 2 to 3 years of deposit for the general public. The fd interest rates in sbi for this FD is predetermined since the time of deposit. 

2. Tax free Fixed Deposits 

A tax free or tax saving  fixed deposit is one in which the interest is tax-free. The fixed deposit must be kept for less than a year and the interest must be received from a bank account in order to be deemed tax exempt. The fd interest rates in sbi for tax free fixed deposit for a tenure of 5 to 10 years from deposit is 6 percent for senior citizens and 5.3 percent for the general public. 

3. Cumulative Fixed Deposit 

Interest on a cumulative fixed deposit is only accessible at maturity. Except for senior persons, account holders are not entitled for interval-based interest. When compared to other forms of fixed deposits, cumulative fixed deposits provide a greater interest rate. This sort of fixed deposit is appropriate for persons who do not require frequent interest payments. The cumulative fixed deposit term ranges from one to five years. The fd interest rates in sbi for cumulative fixed deposit for a term of 10 years is 10 percent with taxes for the general public and the interest is devoid of tax for senior persons. 

4. Non- Cumulative fixed deposit 

The account holder is required to pay interest at regular periods in the case of a noncumulative fixed deposit. Noncumulative FDs have a term of one to five years. In the case of a regular interest distribution, the account holder will be entitled for a reduced sum when the account matures.  This type of FD is suitable for individuals who need a steady source of income in the form of interest on a regular basis. The fd interest rates in sbi for non cumulative fixed deposit is around 9.5 percent for the tenure of 10 years from the deposit for every account holder. 

Conclusion 

A fixed deposit is a type of savings scheme offered by banks and other financial institutions. Fixed deposits are a safe and secure way to save money and earn a small amount of interest. They are often used by people who can’t afford to invest in riskier products, or by those who want the security of knowing their money is safe. However, there are risks involved with fixed deposits, which is why they are often used as a part of a larger financial strategy.