Fixed deposit is the sum of money which is blocked for the period of the deposit. It is the safe and easy investment that requires a one-time deposit only. We can deposit a sum of money called principal for fixed period of time in a bank. Here we will get benefit of earning interest on this sum of money deposited and at the end we can withdraw this deposit along with an interest. Here we are provided with a higher rate of interest than a regular saving account.
It is also known as term deposit or time deposit. The most popular form of term deposit are fixed deposit while other forms of term deposit are recurring and flexi fixed deposit
TYPES OF FIXED DEPOSIT
- NORMAL FIXED DEPOSIT- This is that type of fixed deposit where investors, public invest or deposit their money for fixed period of time and along with it earn a higher rate of interest.
- CUMULATIVE FIXED DEPOSIT- The interest gets accumulated and is paid upon maturity along with the principal.
- NON- CUMULATIVE FIXED DEPOSIT- Here the interest is pay out at
regular intervals as chosen by the deposit
ADVANTAGES OF FIXED DEPOSIT
- In this type of deposit depositor are provided with a higher rate of interest.
- It also encourages saving habit for a longer period of time.
- Bank can also lend this money for short term loans to businessman.
- Bank get this fund for a longer time period which can be used to help others in the form of loans for a short time period.
- Tax saving fixed deposit are a type of fixed deposits that allow the investor to save tax.
HOW BANK FIXED DEPOSIT RATES OF INTEREST VARY WITH CENTRAL BANK POLICY
Central bank adopts a tight monetary policy it means that it hikes the interest rate at which it lends to bank (repo rates). Under such conditions bank also hike both their lending as well as deposit rates.
Under such conditions of high fixed deposit rates fixed deposits become an attractive investment avenue as they offer good returns and are almost completely secure with no risk.
Residents of India can open these accounts for a minimum of seven days.
As I conclude this topic of fixed deposit that it provides a lot of benefit as we deposit a sum of money along with it provide us with a higher rate of interest. Customers are attracted and also it encourages them to save more than keeping the money idle as it can be used by banks to lend it to others at the time of others difficulty. Bank can also lend money for short time period and this money are regulated all around.