Types Of Fixed Deposits In India

  • Added:
    Apr 01, 2014
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Types Of Fixed Deposits In India Photo by Aishwarya Mahurkar

There are four different types of fixed deposits in India . Traditionally, most people are aware about the term deposit when it comes to banking. However, you have a lot more choices available, which are based on the organizations that offer them. Some of these options are as mentioned below:

1. FD with Banks

When you talk about a Fixed Deposit or a term deposit, most people turn to these organizations. Nationalized, co-operative, private sector and foreign banks all provide various fixed deposit schemes , the duration for which can vary from 7 days to 5 years. Along with these variable tenures, they offer different interest rates and other facilities such as overdraft loans as well. You can take the interest on a monthly, quarterly or yearly basis or reinvest it all back in the deposit.

2. Mutual Funds

Typical mutual funds are not fixed deposits. They are more like equities in the stock market. However, these AMCs (Asset Management Companies) also create products known as Fixed Maturity Plans. Like FDs, these plans have assured returns. However, it is a close-ended scheme, which you can enter only when it is launched. They also have huge exit loan amounts similar to the premature withdrawal penalty on FDs. 

3. Company deposits

This option is offered by companies, financial institutions or NBFCs. This is a customized fixed deposit, where the rate of interest is determined by the respective organization. These corporate or company deposits are considerably riskier than bank FDs. However, these deposits offer much higher interest rates to compensate the potential higher risk.

4. Indian Postal Services

A fixed deposit with the Indian Post is similar to the one with a bank in terms of the interest rates that it offers. You can open the account for tenure of 1 to 5 years. These FDs also have penalty for a premature closing. While this may seem similar to what banks offer, it can be an inconvenient option given that several banks offer online services for the term deposit.

If you want to make a long term investment in a non-stock market tool, then investing in FDs is a great choice. All these investments are good tools that could suit your needs well. However, you will also need to consider the organization, interest rates and premature withdrawal penalty well before consenting to either of these options. Most people overlook these factors and make investments in the bank that handles their personal banking. However, research can allow you to choose much better options as well.

Author's Profile

An experienced writer on finance topics, the author articulates of investment choices such as types of fixed deposits in India & recurring deposit schemes. She writes about a variety of topics including the benefits of recurring & various fixed deposit schemes and how to make the right investment choice.

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