• Long-Term Fixed Deposits (FDs)

    Fixed Deposits (FDs) or term deposits are an important component in anyone's financial portfolio. Generally, when it comes to investing in a term deposit, most people are confused about what tenure to choose. FDs come in various tenure ranges including short-term, medium-term and long-term. Long-term fixed deposits are usually held for anywhere between more than 5 years to 10 years. Generally, the tenure range offered on a all types of deposits (short, medium & long) range from 7 days to 10 years. Some banks may offer a higher interest rate for a longer investment duration but this differs from bank to bank. The maximum duration for long-term deposits is 10 years but some banks may also offer a higher duration in India.

    What is a Long-Term Fixed Deposit

    A long-term fixed deposit is a type of deposit account, for which, the period of investment ranges from more than 5 years to 10 years or more.

    Interest rates offered on long-term deposits

    Given below is the updated list of interest rates offered by some of the top banks on long-term fixed deposits, for regular individuals and senior citizens:

    Updated on - 26 Mar 2023

    Top bank FD interest rates for 10-year deposits
    Bank Regular FD Rate (per annum) Senior Citizen FD Rate (per annum)
    Axis Bank FD 5.75% 6.50%
    SBI FD 5.50% 6.30%
    HDFC Bank FD 5.60% 6.35%
    Citibank FD 3.50% 4.00%
    Punjab National Bank FD 5.25% 5.75%

    Benefits/advantages of long-term FDs

    • These types of FDs will help you meet your long-term financial goals
    • A good way to save money instead of parking funds in a savings account
    • Some banks or Non-Banking Financial Companies (NBFCs) may offer a higher rate of interest on long-term deposits
    • One can even invest in long-term tax saver FDs for a period of 10 years
    • Ideal for senior citizens as the rate of interest paid is much higher for this age group
    • A loan can be availed on the respective term deposit for a much lesser interest rate than the market rate
    • Can be used as a collateral to apply for a credit card
    • Overdraft facilities available
    • Banks offer guaranteed returns on fixed deposits and hence the risk factor is almost nil

    Disadvantages of long-term FDs

    • One of the cons of this investment type is that the lock-in period is very long
    • In case other banks offer better interest rates, the depositor will have to make do with a lesser rate on the existing deposit
    • Premature withdrawal may attract heavy penalties

    How to apply for a long-term FD

    The process involved in applying for this type of time deposit is very similar to the regular method. One can either go to the bank website and apply online through net banking or fill out an online application. You can also apply on a number of third-party financial websites like BankBazaar, through which you can compare interest rates of a number of bank FDs and then apply for it online through the website.

    How to earn more out of a long-term FD

    In the case of long-term deposits, there is a chance of earning more interest simply because of the pile up that happens to the principal and interest over the course of the years. There may also be other factors that may help you increase the returns out of such a fixed deposit. Given below are some of the factors:

    • Principal invested
    • Compounding frequency
    • Type of interest payout method

    FAQs on Long-term FDs

    1. What is the minimum investment amount for such a term deposit?

      Generally, the minimum investment that is required for such a type of term deposit is Rs.1,000. However, this amount differs from bank to bank.

    2. Do all banks offer long-term FDs?

      Generally, most banks in the country offer fixed deposits that fall under the tenure range of over 5 years to 10 years. On the other hand, some banks will offer deposits only for 6 years to 7 years. This will depend on from bank-to-bank.

    3. Is there any special benefit of investing in this type of time deposit?

      Generally, there are no additional benefits offered, unless it is some kind of special FD scheme.

    4. How can I choose the best long-term FD scheme?

      To choose the best long-term time deposit scheme, the following factors need to be taken into consideration:

      • Interest rate offered
      • Reputation of the bank
      • Benefits offered such as loan/overdraft facility
      • Premature withdrawal charges
    5. Can I avail tax benefits if I invest in this type of FD?

      Unless it is a special tax-saver term deposit, you will not be able to get any type of tax benefit under Section 80C of the Income Tax Act.

    6. What are the documents required to open such a deposit?

      Generally, most banks require you to be KYC compliant. Apart from this, the documents required may include:

      • Aadhaar card
      • Passport
      • Voter ID
      • Driving license
    7. Do all banks offer a higher interest rate on long-term FDs when compared to short or medium-term FDs?

      No. This is not the case. Though some banks may offer a higher rate of interest on a longer tenure, this may not be the case always. Each bank offers a different rate of interest and it may not always be higher for a longer tenure.

    8. Other than banks, where else can I apply for such type of FDs?

      Apart from banks, there are also Non-Banking Financial Companies (NBFCs) or other financial companies that offer a wide range of fixed deposits, including long-term time deposits.

    9. Are the interest rates offered on company FDs greater than what is paid on bank FDs?

      In most cases, NBFCs usually pay a much higher rate of interest when compared to banks.

    10. What is an NBFC?

      Expanded as Non-Banking Financial Company, it is a type of firm that is involved in granting loans or advances, or any other type of non-banking transaction.

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