Banks earn their revenue primarily by sourcing their funds at a lower cost and offering loans at a higher rate. The difference is their profits. To do so they must accept deposits and lend in the form of loans to borrowers.
Fixed deposits are one of the ways banks source their funds. One of the advantages of fixed deposits is that they come with a predefined term. The bank essentially pays the depositor interest in order to be able to use those funds for a definite and particular term. Most banks therefore charge penal interest if the depositor wants to encash his FD prematurely.
These are few of the reasons why banks do not offer flexible FDs by default. To break a term deposit prematurely, the customer must approach the branch and agree to pay the penal interest/charges and only then allowed to make a premature withdrawal.
A Flexi Fixed deposit is a special type of deposits provided by banks in India. It is a combination of a fixed deposit and a demand deposit.
The depositor with a flexi-fixed deposit must manually add funds to their deposit account.
Various banks like ICICI Bank, SBI, PNB, and Bank of Baroda provide flexi deposit facilities.
Fixed deposits that provide a premature withdrawal option give the depositor the option to close the FD before the specified maturity date.
The interest is calculated on a quarterly compounding basis.
Karishma VP has over a decade of experience in content writing which includes over five years specializing in the field of personal finance. Her career in BankBazaar has given her the opportunity to research and write on a wide variety of financial products ranging from credit cards and home loans to insurance policies and government schemes. She believes that an understanding of personal finance is an important step to leading an independent, empowered life. This has led to her being passionate about learning more about the BFSI sector and writing about it as clearly, concisely, and accurately as possible to make it accessible to a larger audience through BankBazaar. |
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