FD Bonds

Fixed Deposit (Term Deposit)

A Fixed Deposit (FD), also known as a term deposit, is a financial instrument where you deposit a lump sum amount with a bank for a fixed tenure. At the end of this period, you receive the principal along with interest earned. Interest rates on fixed deposits can be attractive, sometimes as high as 9.5%.

How to Invest in a Fixed Deposit?

Simply deposit your savings in a fixed deposit account with your preferred bank or financial institution. It’s wise to compare options across different banks, as various FD products cater to diverse investor preferences. Choose a plan that best aligns with your investment goals and duration.

From the Bank’s Perspective

For banks, fixed deposits function like loans. The bank borrows your money for a fixed period and pays you interest according to regulations set by banking authorities. Interest rates depend on factors such as the deposit location, tenure, and the currency involved.

From the Investor’s Perspective

A fixed deposit is not a regular savings account. Once you lock your money in for the chosen tenure (often up to 5 years), premature withdrawal is typically not allowed or penalized. FDs are popular with individuals, corporations, and non-profits aiming to safely grow their funds without exposure to market fluctuations. They generally offer higher returns than savings accounts, with the added security of fixed interest.

Trust Deposits

Trust deposits are FDs made in the name of one person as a trustee for another. These are commonly used to:

• Facilitate transfer of assets after demise without a will or legal administration,
• Maintain financial privacy, or
• Manage deposits that exceed prescribed limits on single accounts.

Safety vs. Returns

Fixed deposits offer a safe and predictable return on your investment. While they may offer slightly lower returns compared to high-risk investments, they provide stability and peace of mind. The choice between safety and high returns depends on individual risk appetite.

Types of Companies Offering Fixed Deposits

• Financial Institutions
• Non-Banking Finance Companies (NBFCs)
• Manufacturing Companies
• Housing Finance Companies
• Government Companies

Features and Benefits of Company Fixed Deposits

• Generally offer higher interest rates compared to bank FDs.
• Flexible tenures available to suit your convenience.
• Interest payment options include:
      • At maturity
      • Yearly
      • Half-yearly
      • Quarterly
      • Monthly
• Non-transferable, eliminating risk of misuse if the receipt is lost or stolen.
• Premature withdrawal allowed subject to penalties.
• Risk diversification possible by investing across multiple companies and industries.
• Wide variety of options helps in deciding renewals or reshuffling deposits.
• Attractive and competitive interest rates updated regularly.