Fixed Deposit Rate

 

 

Fixed Deposit Rate is the interest rate paid on term deposit accounts, which allow individuals to invest a fixed amount of money for a fixed tenure. The interest rate on fixed deposits is payable after the completion of the deposit period and varies according to the amount and tenure of the funds deposited. The interest rates on fixed deposits are generally higher than the rates applicable on savings accounts and are compounded on a quarterly basis.[br]

 

Factors Determining Fixed Deposit Rate

Fixed Deposit Rates can vary from bank to bank, depending on the terms and conditions of the accounts or schemes offered. The actual rate of interest paid on a fixed deposit can be influenced by various factors, such as the type of currency involved, the duration of the deposit and the location of the deposit.

 

The interest rate on fixed deposits increases with the increase in the amount deposited and the duration of the deposit. A short term fixed deposit rate will be lower than the interest rate on fixed deposits of longer duration. Similarly, schemes offering loans against fixed deposits may offer interest rates that are slightly lower than those with no loan option.

 

The basic feature of a fixed deposit is that the funds deposited cannot be withdrawn for a specific period of time. Some banks allow the withdrawal of fixed deposit funds in emergency situations but may charge a penalty or reduce the fixed deposit rate. In some other cases, banks may provide a separate loan to the depositor by using his/her fixed deposit as collateral.

 

The fixed deposit rate can be payable on a monthly, quarterly, half-yearly and yearly basis or be cumulated till the end of the deposit period.

 

Fixed Deposit Rate on Company Schemes

Apart from banks, fixed deposit schemes are also offered by various companies at varied interest rates. However, company fixed deposit schemes are not as safe as the ones offered by the banks since the latter generally have the backing of the government. The fixed deposit rate offered by a company is generally higher than the bank fixed deposit rate and is indicative of the higher risk involved. The fixed deposit rate offered by a company depends on its financial situation.