Today, in India, there are a plethora of investment options available. And if you are just starting your investment and savings journey, it can be quite overwhelming and confusing to choose the right instrument. One investment instrument which is suitable for all and widely accepted is a bank fixed deposit.

A fixed deposit is the most popular form of term deposit offered by banks that promises guaranteed returns at a fixed interest rate. It is one of the traditional investment instruments in India and has a reputation for being one of the safest investment option.

For a Fixed Deposit investment, you must have a KYC complied savings/current account. You can choose the investment amount and tenure as per your investment goals. The deposit tenure can range from 7 days to 10 years.

Ms. Naina Mallick is a 40 year-old working professional employed with an MNC. She has received Rs. 5 lakh as bonus. She plans to park this money in a safe investment instrument hence she chooses to invest this amount in a 5 Year Fixed Deposit to pay for her son’s college entrance fees at the end of its maturity period.

• Fixed interest rate

One of the most significant benefits of fixed deposit investment is that it offers assured returns at a fixed interest rate, which is much higher than the interest on regular savings account. So, instead of keeping her savings idle in a savings account, Ms. Mallick can invest in an FD and allow her savings to earn better returns.  

Banks fix the FD interest rate at the time of deposit, and it remains unchanged throughout the duration of the deposit you choose. This means, Ms. Mallick can accurately calculate the returns she can get from her investment and plan her finances accordingly.    

Interest income is subject to TDS as per the income tax rules from time to time.

• Flexibility to choose the interest payout

Apart from getting fixed returns, FD investments give Ms. Mallick the flexibility to choose the interest payout duration. She can choose to have the interest credited at fixed frequencies—it can be monthly or quarterly. She can also opt for reinvestment plan if she needs the fund only at the end of the tenure.

• Convenience

Another important benefit of investing in fixed deposits is that they are a safe and convenient form of investment. And, since Ms. Naina  Mallick is sure to withdraw her funds only after 5 years, she need not worry about keeping a constant tab on the market movements.

Instead, she can open a fixed deposit account, deposit a lump sum amount initially and then, relax. Her money will continue to grow over the years, and she will get the interest. Also, opening a fixed deposit account is quite easy and quick.

As an existing South Indian Bank customer, Ms. Naina Mallick can simply submit an application form, and the desired amount will be transferred from her savings account to her FD account. She can also start her FD instantly through the SIB Mirror+ app.

• Loan facility

Suppose, Ms. Naina Mallick faces a situation wherein she needs cash urgently for a medical emergency. Instead of breaking her FD, she can use the FD investment to her advantage, and avail a loan against it.

This is a wonderful financial solution, wherein established banks like South Indian Bank offers loan against FD up to 90% of the deposit amount. She can repay the amount slowly in smaller instalments over a period and keep the savings intact. Also, getting a loan against FD is quick, as the bank will already have all her details and with the FD as collateral, she will get the funds immediately. Loan against FD can also be availed through the SIB Mirror+ app.

Tax saving FD is one of the best tax-saving investments in India and a taxpayer can enjoy a tax benefit of up to Rs. 1.5 Lakh in a financial year under Section 80 C. So, when Ms. Naina Mallick invests in tax saving FD, she can lower her tax liability on the investment year.

• Great investment option for long-term goals

Mrs. Mallick may have different financial goals. And by investing in a fixed deposit, she can get a step closer to achieving her long-term goals as it allows her to keep the capital protected while earning assured returns.

She can consider 5-year FD for future goals like paying for her son’s entrance fee, going on her dream vacation, accumulating funds for any other goals etc.

It is quite evident that FD investments come with several benefits. You can open an FD account within minutes and start saving for your future goals. Make sure to choose a reputable bank like South Indian Bank that offers attractive interest rates on FDs. 

Disclaimer: The article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of The South Indian Bank Ltd. or its employees. The South Indian Bank Ltd and/or the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial/non-financial decisions based on the contents and information’s in the blog article. Please consult your financial advisor or the respective field expert before making any decisions.