{"id":9147,"date":"2020-01-16T15:22:00","date_gmt":"2020-01-16T09:52:00","guid":{"rendered":"https:\/\/www.apnaplan.com\/?p=9147"},"modified":"2020-01-18T11:58:31","modified_gmt":"2020-01-18T06:28:31","slug":"invest-fixed-deposits","status":"publish","type":"post","link":"https:\/\/www.apnaplan.com\/invest-fixed-deposits\/","title":{"rendered":"13 Most Important things to know before investing in Bank Fixed Deposits"},"content":{"rendered":"
Fixed Deposit is the most popular investment in India<\/strong> mainly due to guaranteed returns, choice of interest pay-out frequency, liquidity, safety and ease of execution. Most retired depend on the regular interest earned from fixed deposit for their day to day expenses. Here are 13 most important things you should know before investing in Fixed Deposits:<\/strong><\/p>\n Most government banks including SBI have a minimum deposit limit of Rs 1,000<\/strong> for creating fixed deposit. However private banks have higher limit for minimum deposit. You can avail of ICICI Bank Fixed Deposits for a minimum deposit of Rs 10,000 for General Customers and Rs 2,000 for Fixed Deposits for Minors. In case of HDFC Bank the minimum deposit amount is Rs 5,000.<\/p>\n There is NO maximum limit<\/strong> but if the deposit is above Rs 1 crore, it\u2019s called bulk deposit<\/strong> and generally have higher interest rates than regular FDs<\/strong>. For e.g. SBI considers deposit of Rs 1 crore or more as bulk deposit and for tenure of \u201c1 year to less than 2 years\u201d the interest rate on regular FD is 6.40% while for bulk fixed deposit is 7.00%.<\/p>\n Also Read:\u00a0<\/strong>Highest Interest Rate on Bank Fixed Deposits\u00a0<\/a><\/p><\/blockquote>\n By default, the fixed deposit interest is paid cumulative<\/strong> along with principal amount on maturity. However, if required, the interest payout frequency can be changed to either monthly, quarterly or annually for regular income.<\/strong> This interest rate would be slightly discounted for monthly payout to account for monthly compounding.<\/p>\n Also Read:<\/strong>\u00a013 Investments to Generate Regular Income<\/a><\/p><\/blockquote>\n If not stated, the default compounding for all bank fixed deposit happens quarterly<\/strong>.<\/p>\n Just to let you know the difference, if the advertised interest rate is 8% and you deposit Rs 1 Lakh for 1 year following would be your interest based on different compounding frequency:<\/p>\n Also Read:<\/strong> Understanding Compounding and Yield in Fixed Deposit<\/a><\/p><\/blockquote>\n Most banks offer extra interest of 0.25% to 0.75% for senior citizens<\/strong>.\u00a0SBI, PNB, ICICI Bank etc pay 0.5% extra interest rate to senior citizens. Senior citizens means person who is above the age of 60 years on the day of opening FD.<\/p>\n Most banks also give additional interest rate for its employee and ex-employees.<\/strong> ICICI bank staff (including retired staff) gets additional 1% rate of interest on domestic deposit below Rs 1 Crore.<\/p>\n SBI too gives 1% higher interest to its staff and retired staff. The good thing is the retired staff (who is above 60 years of age and resident Indian) gets benefit of both staff & senior citizens rate<\/strong> and hence gets 1.5% higher rates than regular depositors.<\/p>\n Also Read:\u00a0Best Interest Rate on Senior Citizens Bank Fixed Deposits<\/a><\/p><\/blockquote>\n The tenure for most bank fixed deposit varies from 7 days to 10 years.<\/strong> However, two banks \u2013 IDBI bank and Ratnakar bank do offer tenure of 20 years. In case of IDBI bank the 20 year deposit can only be done with regular payout option and not cumulative.<\/p>\n On the other hand most foreign banks like Citibank, Standard Charted, Deutsche Bank have maximum tenure of 5 years only.<\/p>\n Also Read:\u00a0<\/strong>21 Hidden Charges in Saving Bank Account<\/a><\/p><\/blockquote>\n When you open fixed deposit online or offline you need to give instructions on what to do on maturity.<\/strong> There are 3 options to choose from:<\/p>\n In case you do not give any instructions, on maturity the fixed deposit is renewed automatically. <\/strong>You can also change the maturity instructions mid-way before maturity.<\/p>\n Also Read:<\/strong>\u00a0Section 80TTB: Senior Citizens can Save Tax on their Interest Income<\/a><\/p><\/blockquote>\n In case you break your fixed deposit before completion of tenure, most banks levy penalty.<\/strong> This varies between bank to bank and can be waived off under certain circumstances. Some banks may also choose to waive off the penalty if you are reinvesting the amount in the same bank (happens when there is rise in interest rates).<\/p>\n SBI:<\/span><\/strong><\/p>\n However, no interest will be paid on Deposits which remain for a period of less than 7 days.<\/p>\n Looking at the above condition it may be good idea to break your deposits in Rs 5 lakh<\/strong> in case you have little possibility of premature withdrawal.<\/p>\n ICICI Bank:<\/strong><\/span><\/p>\n ICICI Bank levies penalty of 0.5% if the deposit tenure is less than 1 year and 1% if the tenure is more than 1 year.<\/p>\n Axis Bank, Bank of India, DCB Bank, Dena Bank, IDBI Bank, Yes Bank and some other banks do not have penalty on premature withdrawal.<\/strong> Remember these conditions keep on changing hence you must look at the same while opening your fixed deposit accounts.<\/p>\n Also Read:<\/strong>\u00a0How SWP in Debt Mutual Funds is better than FD for Regular Income?<\/a><\/p><\/blockquote>\n Some banks allow you to break the FD partially.<\/strong> This means if you have FD of Rs 5 lakh but require Rs 1 Lakh, the bank would break only Rs 1 lakh and keep Rs 4 lakh in FD with original terms and conditions. For e.g. ICICI Bank permits partial withdrawal in units of Rs 1,000.<\/p>\n This is a very good feature and provides liquidity.<\/p>\n You can easily get loan against your fixed deposit, which is generally\u00a0in the form of overdraft facility.<\/b> For e.g. SBI gives loan of 90% of the Principal deposit whereas ICICI gives loan up to 90% of principal and accrued interest. The interest rate charged is just around 2% to 3% more than the FD interest rate.\u00a0This can be very useful when you need money urgently for short time<\/strong>. Breaking of FD might not be good solution due to penalty and so loan may come-in handy.<\/p>\n In case you want credit card and not getting one due to poor credit score<\/a> or low income you can get credit card backed by fixed deposit.<\/strong><\/p>\nMinimum and Maximum Deposit Limit<\/h2>\n
Frequency of Interest Payment<\/h2>\n
Compounding Interval<\/h2>\n
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Extra Interest<\/h2>\n
Tenure<\/h2>\n
After FD Maturity<\/h2>\n
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Penalty on Premature Withdrawal of FD<\/h2>\n
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FD Partial Withdrawal<\/h2>\n
Loan\/Overdraft against FD<\/h2>\n