Fixed deposit accounts are popular among Indian investors since they offer stable returns and pose less risk to the investor. On average, Indians save ₹4,25,725 through their fixed deposit investments. This figure indicates the growing popularity of FDs as the most preferred investment option in India. If you are a first-time investor and are looking at FDs as your first investment option, you are on the right path! This article enlists five reasons to invest in FDs in 2024 and elaborates on the features of fixed deposits.
5 reasons to invest in FDs:
Here are five reasons why every investor must invest in a fixed deposit scheme:
- Fixed deposit schemes offer guaranteed returns, and you can easily invest in them:
A fixed deposit investment is a very convenient investment option. To invest in an FD, customers must follow a simple, three-step procedure after downloading the official mobile banking app of their preferred lender:
- Navigate to the section of the mobile app or webpage that reads “open an FD”
- Enter the investment amount and tenure and (if required) provide PAN and Aadhaar card details
- Enter the principal amount to be deposited and complete the video KYC (for new customers)
Another reason to invest in an FD is its feature of offering guaranteed returns regardless of market volatility.
- FDs are flexible investment instruments: Certain types of FDs such as tax-saving FDs do not allow the depositor to withdraw their funds before the maturity date. However, a normal FD offers flexibility to customers in this regard. Customers can benefit from this “flexible tenure” feature offered by banks through their FDs.
- FDs can be used to achieve short-term investment objectives: For investors looking to invest for the short term, FDs are ideal investment instruments. Those who wish to achieve short-term objectives like purchasing a car or saving up for a vacation can open an FD to do achieve these goals.
- First-time investors can use FDs to build an emergency fund: An emergency fund helps an investor prepare for any unforeseen financial emergency, for example, hospitalisation in the family. FDs are ideal for building one’s emergency fund as they offer fixed, predictable returns and pose lower risk.
- FDs offer the loan-against-FD facility: Another advantage of an FD investment is the loan–against–FD facility offered by banks in India. FD depositors can pledge their FDs as collateral and obtain a loan against their FD investments to attend to any financial emergency.
Key features of fixed deposit investments:
The following table illustrates the key features of fixed deposit investments:
| Feature | Description |
| Assured returns | Since the returns offered by an FD are not linked to the market, they are fixed and predictable. |
| Lower risk | Fixed deposit investments pose a very minimal risk to the investor since they are not affected by market volatility. |
| Premature withdrawals are permitted | FDs allow premature withdrawals, except for tax-saving FDs. |
| Higher interest rates for senior citizens | Banks generally offer higher interest rates to senior citizens. For instance, IndusInd Bank offers a 0.50% greater interest than normal FDs. |
| Tax benefits | Section 80C of the Income Tax Act allows depositors to claim tax benefits through their FD investments. |
| Flexible tenures | The tenures of FDs are flexible and can range from a few days to several years. |
To summarise, the five key reasons to invest in FDs include – fixed returns, flexibility, the ability of FDs to act as short-term investment instruments, building an emergency fund, and the loan against an FD facility. First-time investors who wish to invest in fixed deposit schemes must use a Fixed Deposit Returns Calculator. Doing so can help them plan for their future investments and help them decide on their FD’s tenure.
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