1. Normal Fixed Deposits

• Simple bank fixed deposits
• Have a fixed tenure that ranges from 7 days to 10 years
• One time lump sum investment
  

2. Corporate Fixed Deposits

• Offered by Financial and NBFCs
• Fixed tenure ranges from months to years
• Comparatively higher returns Vs normal FDs
  

3. Flexi Fixed Deposits

• Combination of Demand Deposit and Fixed Deposit
• Offers liquidity of savings a/c and reasonable high returns of an FD
• Has the Auto-sweep feature that transfers the excess balance to the FD
• Excess balance amount is decided by the investor
• Balance deposited for a default term of 1 year
  

4. Senior Citizen Fixed Deposits

• For investors over the age of 60
• Higher interest rates compared to normal FDs
• Flexible tenure
  

5. Tax-saving Fixed Deposits

• Tax exemption on the principal amount
• Minimum deposit is ₹1.5 lakhs
• Fixed lock-in period of 5 years
  

6. Cumulative Fixed Deposits

• Interest compounded quarterly, half-yearly, or yearly
• Interest earned is paid after maturity
  

7. Non-cumulative Fixed Deposits

• Earned interest paid out monthly, quarterly, half-yearly, or annually
• Regular payments
  

8. NRO Fixed Deposits

• For Non-resident Indians
• NRIs can deposit the money earned in India in the NRO FD account
• Interest can be transferred to the country of residence
• Principal amount can be transferred back to a certain limit 
  

9. NRE Fixed Deposits

• For NRIs
• NRIs can invest money earned abroad in the NRE fixed deposit account
• Entirety of the interest and principal amount can be transferred back
  

1. Safety

An FD is a relatively safe investment option. Market fluctuations do not impact the interest rate that you get on an FD. However, there are mutual funds like liquid funds that can provide similar if not better, level of safety and returns.  

2. Fixed Lock-In Period

The money invested in an FD cannot be withdrawn before the end of the tenure. Moreover, there are penalties for early withdrawals. In contrast, mutual funds (except ELSS funds) offer higher liquidity and do not charge penalties for early withdrawals.

3. Reasonable Interest Rates

FDs offer interest rates in line with the low-risk profile. There was a time when FD interest rates ranged from 11-13%. But these days, FDs offer lower interest rates (5-6.5%) than liquid funds (7-9%).

4. Taxes

Tax saving FDs offer benefits under section 80c on investments up to ₹1.5 lakhs. But there are more tax efficient investments out there like ELSS funds that have a lower lock-in period and offer better returns. 

5. Benefits Senior Citizens

Investors above the age of 60 can get a better interest rate with Senior Citizen FDs compared to regular FDs.

1. Lock-In Period

The principal amount cannot be withdrawn before maturity. This means that money once invested is stuck for the duration of the deposit. There is a penalty for early withdrawal too. In the event of an emergency, this liquidity risk can be detrimental.  You can consult a Cube Wealth Coach or download the Cube Wealth App.

2. Bank Defaults

A bank defaulting is rare but definitely possible. But ₹5 lakhs per person per bank is guaranteed by the Deposit Insurance and Credit Guarantee Corporation (DICGC). This includes the principal and interest. Any amount over ₹5 lakh is subject to risk.

3. Low Interest Rates

The locked-in interest rate never changes. This is both a cause for concern and a safety net. Market fluctuations don't impact the locked-in interest rate but neither is your money earning more interest depending on the growth cycle of the economy. 

1. Is FD a good investment?

A bank fixed deposit offers predictable returns in the range of 4.5-5.5% along with above average safety. However, most FDs carry a lock-in period and if you're willing to power through that, it may be a potential investment option.

But you must also understand that there are better investment options like p2p lending, asset leasing, and several liquid funds that offer better returns. At the end of the day, it depends on what your investment portfolio needs.  You can consult a Cube Wealth Coach or download the Cube Wealth App.Y

2. Can you lose money in fixed deposit?

FDs are relatively safer than many other investment options but they are prone to risks as well. Broadly speaking, yes, you can lose money in a fixed deposit in two ways:

• Bank Default: ₹5 lakhs per person per bank is guaranteed by the Deposit Insurance and Credit Guarantee Corporation (DICGC). However, anything beyond that may not be recoverable if the bank defaults.
• Inflation: Rising inflation can impact FD returns. For example, if the rate of inflation is 5% and you invest in an FD with 4.5% returns, you'll actually lose 0.5%. That's why market related investments like stocks and mutual funds are becoming popular - they are known to comfortably outperform inflation.

3. Can I withdraw my fixed deposit before the maturity date? 

Ans. While premature withdrawal is possible, it usually comes with penalties and reduced interest rates. The terms and conditions for premature withdrawal vary by bank and the specific fixed deposit scheme.

4. Are fixed deposits insured against losses?

Ans. In many countries, fixed deposits are insured up to a certain limit by a government agency or deposit insurance corporation, providing protection in case the bank or institution fails.