Fixed deposits have been a favourite investment choice for Indians for a long time now. They are safe, offer good returns and are easy to open and operate.

So, how do you choose a good fixed deposit? How to get the best fixed deposit interest rate? And how to maximize your returns from an FD?

Getting the best FD interest rates

The interest rate on fixed deposits varies across tenures. First, check your bank’s website for the interest rates on different tenures. Sometimes, extending your tenure by even a day could earn you a higher interest rate. Pick a tenure that offers you the best fixed deposit interest rate.

Maximising FD returns

The best way to maximise returns from your FD is to allow compounding to work its magic on your investment. When you open an FD, you can choose between monthly or quarterly interest pay-outs and reinvestment of interest. To increase your return, choose the reinvestment option. In this option, your interest amount is reinvested in the FD, and you start to earn interest on interest! To see how this works, check out the HDFC Bank FD Calculator.

For example, assume you open a fixed deposit of Rs 5 lakh for a tenure of 5 years at 7% interest on June 1, 2018, with the reinvestment option. By the end of the first quarter, you would have earned Rs 8822 as interest. But your interest earning progressively improves as your principal grows with reinvested interest. In the last quarter of your tenure, you will earn an interest of Rs 12265 (Rs 3443 more than you earned in the first quarter)*.

* The example is used only for illustration and does not consider TDS.

Holding on to the end

A fixed deposit is best when it is held to the end of its tenure. One, you allow your money to compound and, two, you avoid premature withdrawal charges. You may be tempted sometimes to liquidate your FD to meet short-term cash flow needs. But remember premature withdrawal will attract penalties. A better option would be to opt for an overdraft against fixed deposit. You can get up to 90% of your FD amount as an instant overdraft. You can use as much of it as you need to meet your cash flow while your FD continues to earn interest uninterrupted. The best thing about an overdraft against FD is that you pay interest only on the amount that you use and not on the overdraft amount sanctioned.

Make a smart and safe move. Book an Fixed Deposit today.


 *Terms & conditions apply. Interest rates are subject to change at the sole discretion of HDFC Bank Ltd.

A Recurring Deposit is an investment that requires you to invest a small amount of money each month. The deposit earns interest, and you receive the principal and interest at the end of the term