Fixed deposit, also known as ‘term deposit’, is one of the most common investment tools for people in India. It lets people deposit their money for a specific time while earning at a set interest rate at regular intervals over the selected tenure or upon maturity. Depositors can choose from a variety of fixed deposit alternatives. This article covers the process of opening a short term FD, the documents required and the prerequisites of it. Let us look at the meaning of short-term fixed deposits first.
One of the best short-term investment choices provided by banks and non-banking financial companies (NBFCs) is a short-term fixed deposit. Short term FD is a financial instrument that helps accrue money in a shorter amount of time. The investment can be made for a tenure of 7 days to 12 months. In the chosen tenure, interest is accrued on the principal amount, and the entire sum is paid at the maturity date.
The short term FD rates, however, may vary based on the financial institution. These rates can also be revised; however, because the interest on an ongoing fixed deposit is predetermined, these changes won’t impact.
You can withdraw a short term FD whenever you want to, even before the maturity date. Some financial institutions might impose an early withdrawal fee if you need the money urgently. On the other hand, a few institutions charge no fees for withdrawals before the maturity date.
There are a lot of advantages if you want to invest in a short term FD. Here are a few of
them that you can benefit from if you are looking for short-term gains:
- If you’re seeking an investment that will allow you to invest your money safely for a short period, then short-term deposits are a great choice.
- It is an ideal option if you want a higher rate of return in a short amount of time, as short term FD rates are stable and appealing.
- You can withdraw money prematurely before the end of the term, but it comes with penalty charges, which are relatively minimal. Usually, it is 1% of the interest rate that is fixed.
- You can avail a loan of up to 95% of the short-term FD’s maturity amount with little to no documentation, depending on the financial institution.
- The best part is that due to market fluctuations, short term FD rates can be revised, but because the interest on an ongoing fixed deposit is predetermined, these changes won’t impact. Therefore, investing in a short term FD is highly secure.
Depending on the bank or NBFC you choose, short term FDs have different qualifying requirements. The prerequisites, which apply to most banks and NBFCs, are as follows:
- You need to be an Indian resident to be eligible for short term FD. But, NRIs can also benefit from this facility as a few financial institutions provide them with the opportunity.
- To open an FD for short term, you need to have a savings account to link the deposit to.
- Some banks also need you to open a short-term fixed deposit account along with a savings account.
- To apply for a short term FD, you must be at least 18 years old. If a minor want to apply, then he/she must bring his/her guardian, who has an account.
- Every bank has a different minimum deposit requirement for short-term fixed deposits. The standard minimum deposit amount for banks is Rs 1,000.
You must provide a number of supporting documents in order to reserve a short-term fixed deposit. See what they are in the list below:
- Recent passport-size photograph
- A document that serves as proof of identity and residence. You could bring any one of these:
- Aadhaar card
- Driver’s licence
- Voter ID
- Recent utility bills
- A properly completed and signed application for creating an FD account
- KYC documents
The process to have a short term FD is very simple. You just have to follow these easy steps:
Step-1 Visit a bank or NBFC branch of your choice to open an FD account.
Step-2 Complete the FD application form with correct information and submit it with all required documents. Some institutions might deem it necessary to open a savings account before opening a short-term deposit account, so take note of this.
Step-3 You can also open a short term FD account online if you don’t want to visit a bank. This is super easy as you just have to visit the bank or NBFC’s website. Collect the necessary documents and submit them with the completed online application.
Every bank decides their short term FD interest rates. Let’s take a look at some of the best short term FD rates in the table given below:
|Short term FD Interest Rate for General Citizens
|Short Term FD Interest Rate for Senior Citizens
|Bank of Baroda
|Bank of India
You can benefit from some of the best short term FD rates by creating a short-term fixed deposit account in the abovementioned banks.
An FD calculator is a handy tool that helps determine the amount of interest that will accrue at maturity. It can be found on a variety of banks’ websites. Using a short term FD calculator is convenient as determining an FD’s maturity amount can take up much of your time and effort.
With just a click of a button, you can use an online short term FD calculator. You just need to know the variables – enter the amount invested, the time for which the amount has been invested, and the interest rate on that amount. Calculations for FD maturity are usually tricky and involve many variables. Therefore, using a short term FD calculator can speed up these time-consuming calculations.
Short-term fixed deposit is an ideal solution if you want to buy a gift for a family member or need to buy a vehicle for yourself. Short-term investment is the best fit for you if you wish to gain higher return rates. The hassle-free process and availability of loans make it attractive for people to invest in an FD for short term.
Short Term FD FAQs
Why choose short term FD investments
Short term FD vs ultra-short term funds, which is better?
Investing in ultra-short-term funds involves a higher level of risk, but fixed deposits are risk-free investments. In the case of ultra-short-term funds, liquidity is higher than fixed deposits. Therefore, there are many parameters that you need to consider before answering this question of FD vs ultra-short term funds.