Understanding Different Types of Fixed Deposits

Understanding Different Types of Fixed Deposits - Unity Bank

Personal

5 min read | 10 months ago

Fixed deposits (FDs) are a cornerstone of conservative investing, offering a safe and stable avenue for individuals to grow their savings. While the fundamental premise of a fixed deposit remains constant - deposit a lump sum amount for a predetermined tenure and earn a fixed interest rate - there are various fixed deposit types tailored to diverse financial goals and customer needs. In this comprehensive guide, we will delve into the world of fixed deposits, exploring the different types available, including those designed for Non-Resident Indians (NRIs).

We explore the various fixed deposit types and related aspects in the following sections:

What are the Different Types of Fixed Deposits?

Types of FDs for NRI

FAQs

Conclusion

What are the Different Types of Fixed Deposits?

While the core concept of fixed deposits is straightforward - invest a lump sum amount for a specified tenure and receive a predetermined interest rate - there's a world of variety within the realm of fixed deposits, each designed to cater to different financial objectives and customer needs. Let us explore the wide variety of fixed deposit types below:

Standard Fixed Deposit

The standard fixed deposit is the bedrock of fixed-income investments. This fixed deposit type entails depositing a lump sum amount with a bank or financial institution for a predetermined tenure, which can range from a few months to several years. The interest rate remains fixed throughout the tenure, offering stability and predictability in your returns. Standard FDs are a prudent choice if you have a surplus amount that you don't need immediate access to and prefer low-risk, steady returns.

Tax Saving Fixed Deposit

Tax-saving fixed deposits, also known as 5-year fixed deposits, offer a two-fold benefit. They allow you to earn interest on your deposit while providing tax deductions under Section 80C of the Income Tax Act in India. The lock-in period is typically five years, and you cannot withdraw your funds before that. This makes them a great option for those looking to save on taxes and grow their wealth simultaneously.

Regular Income Fixed Deposit

Regular income fixed deposits are designed for those who require a steady income stream. In this fixed deposit type, you receive periodic payouts, typically monthly or quarterly, as a source of regular income. These are beneficial for retirees and individuals seeking supplementary income to cover their expenses without dipping into their principal amount.

Flexi Fixed Deposit

Flexi fixed deposits offer the best of both worlds - liquidity and fixed returns. They allow you to deposit additional funds into the account or withdraw a part of your deposit without penalties, making them a flexible option. However, the interest rates may be slightly lower compared to standard fixed deposits. These are a suitable choice for those who want a mix of savings and accessibility.

Senior Citizen Fixed Deposit

Senior citizen fixed deposits cater specifically to individuals aged 60 or above. These FDs offer higher interest rates, making them an attractive option for retirees looking to maximize their returns. The rates can be 0.25% to 0.75% higher than standard FDs, providing financial security for senior citizens in their post-retirement years.

Types of Fixed Deposit Accounts for NRI

For Non-Resident Indians (NRIs), the world is a canvas of opportunities. The global diaspora of NRIs is not only contributing to their host countries but also looking back to invest in the land of their roots. As NRIs navigate the intricacies of financial management and wealth preservation, understanding the financial landscape in India becomes paramount. One of the most trusted and sought-after investment options for NRIs is the Non-Resident External (NRE) and Non-Resident Ordinary (NRO) fixed deposits.

Let’s take a closer look at the fixed deposit types specifically designed to cater to the unique needs and financial aspirations of NRIs:

1. NRE Fixed Deposit

Non-Resident External (NRE) fixed deposits are tailored for NRIs (Non-Resident Indians) to park their foreign earnings in Indian currency. The principal and interest in these FDs are fully repatriable, meaning you can freely transfer your funds abroad. They are an excellent way for NRIs to invest in India while ensuring the ease of remittance and protecting their wealth from currency fluctuations.

2. NRO Fixed Deposit

Non-Resident Ordinary (NRO) fixed deposits, on the other hand, are for NRIs to manage their income earned in India. Unlike NRE FDs, the principal in NRO FDs is non-repatriable, meaning you can't transfer it freely outside India. These FDs are ideal for NRIs looking to maintain and manage their Indian earnings and investments, making it a prudent choice for those with Indian income sources.

Conclusion

Fixed deposits are a versatile investment instrument that caters to a wide spectrum of financial objectives, risk tolerances, and customer categories. Whether you are a standard investor, a senior citizen seeking enhanced returns, an individual looking for tax benefits or regular income, or an NRI seeking to invest in India, there is a fixed deposit type that aligns with your financial aspirations.

When considering an FD, it is crucial to evaluate your financial goals and risk appetite to select the most suitable type. Careful research, comparison of interest rates, and a thorough review of terms and conditions should precede your decision. In doing so, you can make the most of your fixed deposit investment and build a robust financial foundation for the future. Unity Bank’s Fixed Deposits, are a reliable and secure option for wealth preservation and steady growth.

About Unity Small Finance Bank

Unity Small Finance Bank is committed to making banking simpler and more accessible for everyone. Our services include Savings Account, NRI account, Current Account, Fixed Deposits, and Personal Loans offering flexible tenures and attractive interest rates. We also offer financing options like MSME Loans and Microfinance to support businesses and underserved communities. Learn more about Unity Small Finance Bank here.