Fixed Deposit

The account which is opened for a particular fixed period (time) by depositing particular amount (money) is known as Fixed (Term) Deposit Account.

The term 'fixed deposit' means that the deposit is fixed and is repayable only after a specific period is over.

Under fixed deposit account, money is deposited for a fixed period say six months, one year, five years or even ten years. The money deposited in this account can not be withdrawn before the expiry of period.

The rate of interest paid for fixed deposit vary (changes) according to amount, period and from bank to bank.


Features of Fixed Deposit Account
  • The main purpose of fixed deposit account is to enable the individuals to earn a higher rate of interest on their surplus funds (extra money).
  • The amount can be deposited only once. For further such deposits, separate accounts need to be opened.
  • The period of fixed deposits range between 15 days to 10 years.
  • A high interest rate is paid on fixed deposits. The rate of interest may vary as per amount, period and from bank to bank.
  • Withdrawals are not allowed. However, in case of emergency, banks allow to close the fixed account prior to maturity date. In such cases, the bank deducts 1% (deduction percentage many vary) from the interest payable as on that date.
  • The depositor is given a fixed deposit receipt, which depositor has to produce at the time of maturity. The deposit can be renewed for a further period.

Advantages of Fixed Deposit Account
  • Fixed deposit encourages savings habit for a longer period of time.
  • Fixed deposit account enables the depositor to earn a high interest rate.
  • The depositor can get loan facility from the bank.
  • On maturity the amount can be used to make purchases of assets.
  • The bank can get the funds for a longer period of time.
  • The bank can lend such funds for short term loans to businessmen.
  • Fixed deposits indirectly boost economic development of the country.
  • The bank can also invest such funds in profitable areas.

GOI Bond

The 8% Government of India Savings (taxable) bonds, 2003 is a bond issued by the Reserve Bank of India (RBI) commencing April 21, 2003. The bonds are available for purchase by individuals. As the name indicates, the rate of interest offered on the bond is 8% per annum. Interest is taxable in the hands of the investor. Since bonds are issued on behalf of the Government of India, it is the safest investment any investor can look for. However, interest on the bonds is taxable and it has a lock in of six years.

Features
Maturity Period 6 years
Rate of Interest 8.0% per annum (Taxable)
Risk Attached Low Risk
Minimum Investment Rs. 1,000/-
Maximum Investment Unlimited in multiples of Rs.1,000/-
Collateral Facility Available
Overall Liquidity Not tradable
Date of Issue Date of realization of the funds