BANK DEPOSITS

A) Fixed Deposit:

When you deposit a certain sum in a bank with a fixed rate of interest and specified time period,

it is called a bank fixed deposit (FD). At maturity, you are entitled to receive the principal

amount as well as the interest earned at the pre-specified rate during that period. The rate of

interest varies between 4 and 6 per cent, depending on the maturity period of the FD and the

amount invested.

3.2.1) How to apply in fixed deposit?

One can get a bank FD at any bank, be it nationalized, private, or foreign. You have to open a FD

account with the bank, and make the deposit. However, some banks insist that you maintain a

savings account with them to operate a FD. When a depositor opens an FD account with a bank,

a deposit receipt or an account statement is issued to him, which can be updated from time to

time, depending on the duration of the FD and the frequency of the interest calculation. Check

deposit receipts carefully to see that all particulars have been properly and accurately filled in.

3.2.2) Features of bank deposit:

1. Safety

Bank deposits are fairly safe because banks are subject to control of the Reserve Bank of India

(RBI) with regard to several policy and operational parameters. The banks are free to offer
varying interests in fixed deposits of different maturities. Interest is compounded once a quarter,

leading to a somewhat higher effective rate.

2. Minimum deposit

The minimum deposit amount varies with each bank. It can range from as low as Rs. 100 to an

unlimited amount with some banks. Deposits can be made in multiples of Rs. 100/.

3. Deposit period fixed

Before opening a FD account, try to check the rates of interest for different banks for different

periods. It is advisable to keep the amount in five or ten small deposits instead of making one big

deposit. In case of any premature withdrawal of partial amount, then only one or two deposit

need be prematurely encashed. The loss sustained in interest will, thus, be less than if one big

deposit were to be encashed. Check deposit receipts carefully to see that all particulars have been

properly and accurately filled in. The thing to consider before investing in an FD is the rate of

interest and the inflation rate. A high inflation rate can simply chip away your real returns.

3.2.3) Returns from Fixed bank deposit:

The rate of interest for Bank Fixed Deposits varies between 4 and 11 per cent, depending on the

maturity period (duration) of the FD and the amount invested. Interest rate also varies between

each bank. A Bank FD does not provide regular interest income, but a lump-sum amount on its

maturity. Some banks have facility to pay interest every quarter or every month, but the interest

paid may be at a discounted rate in case of monthly interest. The Interest payable on Fixed
Deposit can also be transferred to Savings Bank or Current Account of the customer. The deposit

period can vary from 15, 30 or 45 days to 3, 6 months, 1 year, 1.5 years to 10 years. Example of

bank deposit:

Duration Interest rate (%) per annum

15-30 days 4 -5 %

30-45 days 4.25-5 %

46-90 days 4.75--5.5 %

91-180 days 5.5-6.5 %

181-365 days 5.75-6.5 %

1-2 years 6-8 %

2-3 years 6.25-8 %

3-5 years 6.75-8

3.2.4) Advantages of fixed bank deposit:

1. Safest investment

Bank deposits are the safest investment after Post office savings because all bank deposits are

insured under the Deposit Insurance & Credit Guarantee Scheme of India. It is possible to get a

loans up to75- 90% of the deposit amount.

2. Any Where in India

One can get a bank FD at any bank, be it nationalized, private, or foreign. You have to open a FD

account with the bank, and make the deposit. However, some banks insist that you maintain a

savings account with them to operate a FD. When a depositor opens an FD account with a bank,

a deposit receipt or an account statement is issued to him, which can be updated from time to

time, depending on the duration of the FD and the frequency of the interest calculation. Check

deposit receipts carefully to see that all particulars have been properly and accurately filled in.