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The main purpose of fixed deposit account is to enable the individuals to earn a higher rate of interest on
their surplus funds (extra money).
The amount can be deposited only once. For further such deposits, separate accounts need to be opened.
The depositor is given a fixed deposit receipt, which depositor has to produce at the time of maturity. The
deposit can be renewed for a further period.
As per the Traditional scheme, the interest on the FD account is credited to the Savings account specified by
the depositor on a monthly basis or on a quarterly basis. For the Reinvestment scheme, the interest is
compounded to the principal amount on a quarterly basis.
Tax is deducted at source, from the interest on Fixed Deposits, as applicable, as per the Income Tax Act,
1961.
Where,
A = Final Amount that will be received
P = Principal Amount (i. e. initial investment)
r = Annual nominal interest rate (as a decimal i. e. if interest is paid at 5. 5% pa, then it will be 0. 055) (it should not
be in percentage)
n = number of times the interest is compounded per year (i. e. for monthly compounding n will be 12, for half year
compounding it will be 2 and for quarter it will be 4
t = number of years
1.
Annual Compounding: In this case there is no compounding effect because the term is only one year, the
same as the compounding frequency. Thus, all we have is simple interest (i. e. , the effective rate is equal to the
nominal rate)
2.
Monthly Compounding: In this case there are 12 compounding periods. Interest earned each month is
added to the balance and is itself available to earn interest in each succeeding month. Thus, the future value is
greater than the amount calculated using annual compounding.
3.
4.
Daily Compounding: Now instead of earning interest weekly, we earn it daily. As expected the, the impact
of the interest rate is magnified. However, this time the impact is not as dramatic as might be expected.
5.
Continuous Compounding: Interest that is, hypothetically, computed and added to the balance of an
account every instant. This is not actually possible, but continuous compounding is well-defined nevertheless as
the upper bound of "regular" compound interest. The result is the maximum effect that compounding frequency
can exert on a given interest rate and term.
Period
Interest % p. a for
1 Lac
30 days
7.50%
30 days
7.50%
Get Syndicate B
Syndicate Bank
30 days
7.50%
60 days
8.00%
90 days
8.00%
120 days
8.50%
6 months
8.50%
9 Months
8.75%
Get Indian Ba
1 Year
9.50%
Get DHFL
1 Year 6 Months
9.25%
Get Mahindra Fi
2 Year
9.75%
Get DHFL
3 Years
9.80%
4 Years
9.80%
5 Years
9.80%
Indian Bank
DHFL
Mahindra Finance
DHFL
Shriram Finance
Shriram Finance
Shriram Finance
o
o
Renewal Rolling over of deposits for another term wherein tenor can differ.
Auto-renewal: Deposit-tenor remains unchanged but interest depends on rates prevailing at renewal.
Withdrawal -
Either of the two are executed based on the account-holders instructions without which the deposit
will be automatically renewed.
Nominee: Person entitled to receive funds accrued in a particular FD upon depositors death.
Nominee details required: Name, age, address, relationship; legal guardians details (for minors).
Nominees are named for every individual deposit.
Proof of depositors death required to claim funds.
Up to two people allowed as nominees.
Without a nominee, money accrued in the FD will not be automatically transferred to the account-holders
next of kin or legal heirs.
Nominees are legally trustees of fixed deposit funds. Money so received will have to be transferred the legal
heirs (if different from the nominee)
Nominations can be effected for FD accounts held in an individual or joint capacity with an either or
survivor instruction.
Nominations can be changed or cancelled subject to the account-holder(s) consent For FDs held by minors,
nominations are done by legal operators of the account.
In order to access funds at a short interval, one can avail a loan against fixed deposits held with the bank. It is given
in the form of an overdraft against your deposited amount. This is an alternative given to customer by bank instead
of breaking the deposit prematurely.
Loan against fixed deposit is a great option for those looking to avail a loan at a better rate when compared to
personal loans where interest rates range from 14-30% p.a. Moreover, you will continue to earn interest on the
deposit though you have availed a loan against it.
Most of the banks allow a loan in the range of 70-90% of the deposit amount. Some banks even offer more than this
range. There is no standard on the amount of loan that can be sanctioned. It varies from bank to bank and also upon
the amount deposited.
Interest rate charged on the loan given on a fixed deposit is usually 2-2.5% above the interest paid by the bank on
the deposit. Once again, it varies from bank to bank.