Perfect for investors who are in the category of those averse to risk taking, a fixed deposit is the go-to investment product. Commonly known as an 'FD', this is an investment product in which interest gets collected over a period based on the principal amount that is invested in a fixed deposit account. Many institutions offer you a fixed deposit account, and these range from public sector and private sector companies to banks of all sizes.
In order to plan your fixed deposit investment appropriately, depending on your monetary requirements, you should do some research on interest rates, tenors and periodic payout facilities before you invest. However, the main aspect of an FD may be in terms of the amount you wish to invest in the first place, and you need to find out if there is a minimum amount prescribed.
How Does a Fixed Deposit Work and What is Its Importance?
A fixed deposit offers you a safe way to invest your wealth for a predetermined tenure. When you choose to place your money in a fixed deposit account, you technically lock it in for a period and earn interest (which is also predetermined) on it. It is possible for you to get a payout of your interest during the tenure of your deposit, on a monthly, quarterly, half-yearly or yearly basis, depending on your tenure. You can also opt for the cumulative accumulation of interest and collect the total interest earned when your investment reaches its maturity date.
Tenors are flexible, and you can easily operate different FD accounts that are spread through varying tenors. This is done so that you are always assured of a payout from time to time, or on a regular basis. Since a fixed deposit guarantees you interest according to a fixed rate, its importance lies in the fact that it is a dependable investment instrument where returns are concerned. Additionally, fixed deposits can be a useful tool of earning interest and saving as you can put minimal amounts into a fixed deposit account based on your distinct needs.
What is the Minimum Amount of Investment for an FD?
While there is no limit to the upper cap on an FD, and you can invest whatever maximum amount you wish, certain banks and NBFCs do stipulate a minimum sum of money that you may invest as your principal amount. This minimum amount varies between institutions, and you will have to check certain banks and institutions that you are considering for your FD on their respective websites.
You can use the reference below to get an idea of the minimum rates for an FD account in some top banks in India:
- Axis Bank - Rs. 5,000
- HDFC Bank - Rs. 2 lakh
- Canara Bank - Rs. 1,000
- ICICI Bank - Rs. 10,000
- Kotak Mahindra Bank - Rs. 5,000
Fixed Deposit Rates for offered by different banks and NBFCs
Similar to Minimum deposit amount, the fixed deposit rates also vary from bank to bank.
● IDFC Bank offers the highest FD interest rate which is 6.00% p.a. which is for a tenure of 5 years.
● Axis bank FD rate of 5.75% p.a is the second highest for a tenure of 5 years and above.
● The third highest interest rate offered by HDFC bank is 5.60% p.a. for a tenure of 5 years and above.
Investment in a Fixed Deposit
When you invest in a fixed deposit, you get many advantages of high interest rates. First of all, you can invest minimal amounts, so if you have some surplus money with you, you can easily multiply it instead of letting it just sit in a savings bank account. You also have fixed deposits that can save you tax, and when you shop for fixed deposit instruments, you should have a set of questions ready regarding amounts to invest and interest earned on these.