What is a fixed deposit?

It is one of the typical avenues used by most individuals for savings in India. In fixed deposits, people can save money in the bank for a definite period and can earn returns on it at the end of the term. 

For example, say you deposited INR 50,000 at an interest rate of 7.6% for a fixed term of 5 years. You will be paid an additional INR 4180 every year until the end of the term. The term, in this example, is five years. So, at the end of the five years, you can draw a total amount (invested amount + income earned on it) of INR 79,328.

The interest rates are modified by banks from time to time, based on various factors such as monetary policy, inflation, reforms in the union budget, etc. This investment is risk-free and offers guaranteed returns on the deposited amount.

A fixed deposit is a great investment option for people who are not interested in taking risks. Now that you know about the fixed deposit and its significance, the only points that you have to remember while investing in a fixed deposit are – read the terms and conditions thoroughly and choose the scheme wisely after analysing the pros and cons.