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Fixed deposits are a risk-free way to ensure savings grow in a sustained manner over a period of time. With interest rates higher than a normal savings account, fixed deposits are a wise way to invest funds. With a saving mentality as an average Indian, fixed deposits will be the first choice for any individual. Since fixed deposits are not linked to the market rates, they do not offer the same liability of lowering rates as with other investment options. In addition to that, banks normally offer a higher rate of interest for fixed deposits that savings or current accounts.
Almost every bank in India offers the option of opening a fixed deposit account with minimal documentation. With interest rates ranging from 5% to 9%, banks can easily be chosen as per the interest rates they offer and the extra facilities available on them. The minimum amount that is accepted by banks for fixed deposit accounts could be as low as Rs. 1000 and some banks offer no maximum cap for the amount in a fixed deposit. Additionally, banks also offer monthly payouts and withdrawals on fixed deposits. That serves as an alternative income source for the account holder. Going by the monthly payout options, the interest on the balance of the fixed deposit is paid at a discount, if chosen. Banks with the better rates as of now and with the monthly payout options are as follows -
Interest rates offered by banks on fixed deposits are directly related to the tenure for which the deposit is intended for. Consequently, a five-year deposit will attract a higher interest rate than a one-year deposit. At times, some banks might reduce the maximum interest rate by a small fraction if the tenure exceeds 5-6 years. In addition to that, banks might offer special rates that are higher than the standard rates applicable. Senior citizens might be able to avail an interest rate that is 0.25-0.5% higher than the standard rates. Before choosing to open a fixed deposit account with any bank, it is advisable to note what are the premature closing rates, and of course, if an additional source of income is needed, whether monthly payout options are available or not.