Fixed Deposit Interest Rates 2019

What is a Fixed Deposit?

In a fixed deposit, a lump sum is invested in a bank or NBFC for a fixed tenure, at an agreed rate of interest. Bank fixed deposits are considered to be safe. Even non-banking financial institutions NBFCs, offer fixed deposits. The longest term in a FD is 10 years.

A fixed deposit is a financial instrument that provides investors with the option of depositing surplus money at higher interest rates than savings bank accounts, provided the money is locked in till maturity. It is a safe investment compared to other investments like stocks or mutual funds.

The money can be deposited for a specific period ranging from 7 days to 10 years. Once the money is invested with a bank or NBFC, it starts earning interest based on the duration of the deposit. Usually, the amount deposited in FD cannot be withdrawn before maturity, but you may withdraw after paying a small penalty.

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Who Should Invest in FD?

Any individual, who is ready to invest his/her money for the agreed period, can invest in an FD. You must remember that there is no liquidity in FDs like SB accounts and banks are offering higher interest rates to compensate for the same. Individuals who have no other option of saving tax can invest in 5 year Tax Saver FDs to avail tax deductions. This has a 5 year lock-in period.  To enjoy the maximum benefits of FD, you must invest money for the complete period (Till Maturity). You need to keep in mind that premature withdrawal attracts penalties.

As an investor if your concern is safety of investment, then go for bank deposits. There should be no risk in keeping money in fixed deposits with Nationalized Banks in India. The Government of India is a major shareholder in all Nationalized Banks and these banks are monitored and controlled by the RBI.

SEE ALSO: Why ULIPs Are Better Than FD? - (Revised)

How to Open an FD?

FDs can be opened by personally visiting the nearest bank branch or even online. Before finalizing the bank, make sure to go through the interest rates and choose the one that offers best interest rates on fixed deposits.

FD can be opened in the following ways:

Online: You can open FD online by filling the online application on the bank’s official website. You must have account details and required documents to open FD online. You can also open a fixed deposit via net banking. Net banking can be availed if you already have a savings/current account with the bank. For opening a fixed deposit, login to the banks website by using log in ID and password and follow the steps given below:

• From the deposit menu, click on ‘fixed deposit’.
• Select ‘fixed deposit account opening’.
• A fixed deposit account opening page appears.
• You have to fill the details required like account type, placement period, principal amount, currency, nominee and so on.
• Select ‘preview’ button.
• A new page appears displaying all the information that you have entered.
• Enter the OTP generated in the ‘enter OTP password’ section
• If you want to make changes click on ‘edit’ else click on ‘submit’ to complete the transaction.
• Click ‘ok’ on the fixed deposit completion page to complete the process.

Offline: You can open FD offline by visiting the nearest branch with all relevant documents. Fill the offline application and submit a copy of all the required documents. Select the tenure and deposit the money. Once the account is opened, a fixed deposit certificate is issued, that can be collected from the bank after two days.

Features of Fixed Deposits

Fixed deposit offers a sound investment avenue for investors as the returns are guaranteed and do not depend on market fluctuations. You can get the interest income on a monthly basis, quarterly basis or cumulative basis

Following are the features of fixed deposit:

• Tenure/Term: Term of a fixed deposit ranges between six months to 10 years.
• Guaranteed Returns: Investing in fixed deposit is the safest mode of investment. Your investment gets compounded and offers good returns.
• Compound Interest: Interest income is compounded monthly, quarterly or annually.
• Withdrawal: Partial or full withdrawal can be made with a penalty.
• Loans: Loan against fixed deposits can be availed.
• Senior citizen benefits: Senior citizens get higher interest rates in the range of 0.25 - 0.5% above other people.
• A fixed deposit provides safe investment option along with guaranteed returns.
• An investor can earn income on interest on a monthly, quarterly or cumulative basis.
• Tenure of deposit ranges from 7 days to 10 years.
• Cash can be deposited in bulk in fixed deposits. Deposits of over a crore earn higher interest.
• A person can avail loan against fixed deposits
• The rates of interest are not affected by stock market fluctuations.
• It enables investors earn higher rate of interest on their surplus funds.

SEE ALSO: Fixed Income Securities

Advantages of Fixed Deposits

Following are the advantages of fixed deposits:

• Less risky: Investing in fixed deposit is the safest mode of investment. Banks usually don’t default and FDs are considered as quite safe. Fluctuations in the equity market have no impact on FDs.
• Better returns: Fixed deposits offer better returns than a savings bank account. Returns earned on FD are a result of compound interest.
• Tax benefits: Investing in FD gives tax deductions under Section 80C. You can avail tax deductions up to Rs 1,50,000 a year for 5 year tax saver FDs.
• Security for availing loans: FD can be pledged as a security, for availing credit cards called secured credit card. You can also avail a loan against FD.
• Tenure: You can choose tenure of investment. Tenure of FD ranges from 7 days to 10 years.
• Guaranteed returns: One of the main benefits of investing in fixed deposits is that it provides guaranteed returns as there are no risks involved as compared to other investment options like mutual funds, equity or stocks.
• Easy to understand: Opening a fixed deposit is very easy and the terms of fixed deposit are simple.
• Encourages investment: FDs help people set aside money for the future, thus nurturing the habit of investment and saving for future needs.
• Good returns: fixed deposit offers higher rates of interest as compared to savings accounts. NBFCs and company fixed deposit offer better interest rates than bank FDs. Company fixed deposits are riskier than Bank FDs.
• Flexibility: the investors can choose the tenure of investment and the amount of money he/she wants to invest. It also has provisions for investors to open multiple accounts at multiple banks.
• Tax benefit: the 5 year tax saver fixed deposit offers tax exemption under Section 80C of the income tax act. An investor can claim tax exemption for a maximum investment of 1.5 lakhs a year.
• Avail loans on FDs: an investor can avail loans by pledging the fixed deposit as security against the loan. An individual can avail up to 90% of the FD amount as loan.
• Liquidity: If the investor chooses to close the FD by withdrawing during financial emergencies, he can do so with a small penalty.

SEE ALSO: Why Senior Citizen Saving Scheme Better Than FD?

Disadvantages of Fixed Deposits

Though fixed deposit is a safe investment and offers guaranteed returns, they are not suitable for everyone. Following are the disadvantages of investing in fixed deposits:

• Reducing interest rates: Fixed deposits are not attractive investments any more. Interest rate offered on a FD has declined over the past few years. Adding to that, inflation is eating up interest earned on the FDs.
• Tax on returns: The interest earned on FD is taxed as per tax slab. If interest exceeds Rs 10,000 a year (Rs 50,000 in case of senior citizen), then TDS of 10% is applicable. You can fill Form 15G (Form 15H) in case of senior citizens, if income is below tax exemption limit to save TDS on interest income.
• Penalties on premature withdrawal: Banks would charge penalties on premature withdrawals.
• Loss of opportunity: There are other investment options which offer better returns. Investing in FDs over other investments would mean a loss of opportunity to earn more returns.
• The money invested in a fixed deposit is locked away for a certain period, so the investor cannot access funds till maturity.
• Fixed deposit offers relatively low return. An investor can make more money by investing in other investment avenues like NPS, ELSS or mutual funds, albeit at higher risk.

Comparison Between Different Bank Rates

Below table shows the interest rate of fixed deposit offered by popular banks:

Bank	Normal Citizens	Senior Citizens
State Bank of India	5.75% – 6.85%	6.25%  – 7.35%
HDFC Bank	3.50% – 7.40%	4.00% – 7.90%
ICICI Bank	4.00%  – 7.50%	4.50% – 8.00%
Axis Bank	3.50%  – 7.60%	3.50% – 8.25%
Kotak Mahindra Bank	3.50%  – 7.30%	4.00% – 7.80%
IDFC Bank	4.00% – 8.25%	4.50% – 8.75%
Bank of Baroda	4.50% – 6.85%	5.00% – 7.35%
IDBI Bank	5.75% – 7.05%	5.75% – 7.55%
Indian Bank	4.50% – 6.75%	5.00% – 7.25%
PNB Bank	5.70% – 6.75%	6.20% – 7.25%
Allahabad Bank	5.00% – 6.75%	–
Andhra Bank	4.00% – 6.80%	4.50% – 7.30%
Bank of India	5.25% – 6.70%	5.25% – 7.20%
Canara Bank	5.75% – 7.00%	6.25% – 7.50%
Central Bank	4.75% – 6.60%	5.25% – 7.00%
Union Bank of India	5.00% – 6.85%	5.50% – 7.35%
Corporation Bank	4.50% – 6.80%	5.00% – 7.30%
Syndicate Bank	4.75% – 6.80%	5.25% – 7.30%
Citibank	3.00% – 7.50%	3.50% – 8.00%
HSBC Bank	3.15% – 7.00%	3.65% – 7.50%

FDs Vs ELSS

Below Table Shows the Differences Between FDs and ELSS:

Parameter	Fixed Deposit	ELSS
Eligibility to Invest	Fixed deposits can be opened by any Indian citizen. NRIs are also eligible to open a fixed deposit.	All citizens of India can invest in Equity Linked Savings Schemes. Even NRI’s can invest in ELSS.
Facility of Joint Investment	Fixed Deposits can be opened jointly with spouse.	Joint investments can be made in ELSS. However, only the first holder gets tax deduction.
Lock-in period	The minimum lock-in period ranges between 7 days to 10 years.	The minimum lock-in period is 3 years.
Pre-mature withdrawals	You cannot withdraw from a FD before maturity without penalties.	Withdrawals are not allowed until the lock-in period of 3 years.
Returns	The rate of interest is decided by the banks.	The rate of return depends on the markets.
Rate of return for the entire tenure	The rate of return is fixed and does not vary across tenure of investment.	The returns on ELSS are not fixed and there is no guaranteed return. It is decided by market movements.
Facility of Loan	Credit cards are issued against fixed deposit called secured credit card.	No loans are provided against investment in ELSS.

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