 | The examples and perspective in this article deal primarily with India and do not represent a worldwide view of the subject. (October 2015) |
A fixed deposit (FD) is a tenured deposit account provided by banks or non-bank financial institutions which provides investors a higher rate of interest than a regular savings account, until the given maturity date. It may or may not require the creation of a separate account. The term fixed deposit is most commonly used in India and the United States. It is known as a term deposit or time deposit in Canada, Australia, New Zealand, and as a bond in the United Kingdom.
A fixed deposit means that the money cannot be withdrawn before maturity unlike a recurring deposit or a demand deposit. Due to this limitation, some banks offer additional services to FD holders such as loans against FD certificates at competitive interest rates. Banks may offer lesser interest rates under uncertain economic conditions.[1] The tenure of an FD can vary from 7, 15 or 45 days to 1.5 years and can be as high as 10 years.[2]
In India these investments can be safer than Post Office Schemes as they are covered by the Indian Deposit Insurance and Credit Guarantee Corporation (DICGC). However, DICGC guarantees amount up to ₹ 500000 (about $6850) per depositor per bank.[3] In India they also offer income tax and wealth tax benefits.
- ^ Sumant Khanderao Muranjan (1952). Modern banking in India. Kamala Pub. House. p. 80.
- ^ Mohan Lal Tannan (1965). Banking law and practice inIndia. Thacker. p. 23.
- ^ "DICGC – A guide to FD". Archived from the original on 22 August 2013. Retrieved 6 January 2014.
3. What is the maximum deposit amount insured by the DICGC? Each depositor in a bank is insured up to a maximum of 100,000 (Rupees One Lakh) for both principal and interest amount held by him in the same right and same capacity as on the date of liquidation/cancellation of bank's licence or the date on which the scheme of amalgamation/merger/reconstruction comes into force.