Editorial Team
4 mins read • 20 Dec 2025
Fixed Deposits, popularly called FDs, also called Term Deposits, remain the most trusted and popular financial savings product in India.
As per the Reserve Bank of India's Weekly Statistical Supplement, the total amount of Fixed Deposits (Time Deposits) with banks is in the order of Rupees 220 Lakh Crores or 220 Trillion as of the end of November 2025. Think about how big that number is - 220 followed by 12 zeroes. For comparison, Net Assets Under Management for Mutual Funds in India is in the order of Rupees 80 Lakh Crores or 80 Trillion as of the end of November 2025 (AMFI Monthly Data).
What makes Fixed Deposits so popular is an unbeatable combination of safety (meaning they offer protection against loss of principal with a guaranteed return) and accessibility (meaning they are widely available for investing through bank branches and digital channels).
So what are Fixed Deposits? Let's dive in.
Placing or investing in a Fixed Deposit or Term Deposit with a bank means you keep a certain amount of money (called the principal amount) with the bank for a fixed period of time. This fixed period of time is called the tenor or term of the deposit. In return, the bank pays you interest on the deposited principal amount at a rate called the fixed deposit interest rate or the contracted interest rate for the tenor of the deposit. The principal amount, the tenor and the rate of interest are all agreed upfront between you and bank when you place the deposit with the bank. Since you have agreed to place the deposit for a fixed tenor, you cannot, typically, take the money back from the bank before the end of the deposit tenor.
In case you are wondering, how do Fixed Deposits differ from Savings Bank Accounts? - the short answer is that they serve different needs. Savings Bank accounts offer utility (meaning they are what make services like UPI, ATMs and Debit Cards possible) and instant liquidity (there is no fixed tenor, you can use or withdraw your money any time you want). Because banks offer utility services and instant liquidity, they offer a lower interest rate on Savings Bank accounts. Fixed Deposits is where you forego the utility services and instant liquidity by locking in your money for fixed period in return for a higher rate of interest. Fixed Deposits are better vehicles for saving and growing your money.
Jargon Buster: Some banks offer Sweep Deposit products where money is dynamically moved or swept between Savings Bank Accounts and Fixed Deposits. Sweep Deposits attempt to provide the utility and liquidity of Savings Bank Accounts while offering a higher interest rate which is, effectively, somewhere in between that of traditional Savings Bank Accounts and traditional Fixed Deposits.
Did you know?
Some banks let you book Fixed Deposits through digital channels even if you do not have a Savings Bank Accounts with the same bank. You will, of course, have to complete the Know Your Customer (KYC) requirements of the bank before you can book such standalone digital Fixed Deposits.
Whether you choose to invest in Fixed Deposits with the bank where you have a Savings Bank Account or any other bank, please ensure that you complete the Nomination process for Fixed Deposits. A Nominee is someone you trust (usually a family member) to act as a custodian of the money in your Fixed Deposits in the unfortunate event of your death. You can nominate up to four people, specifying their share of the deposit amount. Nominees receives the money on behalf of the legal heirs and ensure the money is distributed among the legal heirs. Having nominees can significantly simplify the process and paper work required for transfer of money in Fixed Deposit from banks to the rightful legal heirs.
Let's explore some of the most commonly used words you will encounter while dealing with Fixed Deposits.
Tenor or Term of a Fixed Deposit: Refers to the fixed period of time for which you place a deposit with the bank. The lowest tenor offered by banks is 7 days. The highest tenor offered is usually 10 years, with some exceptions. Since you are agreeing to park your money with the bank for a fixed period without taking it back, it is effectively locked in with the bank. That is why, tenor is also referred to as the lock-in period. The Maturity Date is the last day of the Fixed Deposit tenor when the lock-in ends and the principal + interest amount becomes available to you for use.
Interest Rate on Fixed Deposits: While banks offer both Fixed and Floating rates of interest, Fixed Deposits with Fixed rates of interest are overwhelmingly popular. Banks offer fixed rates of interest on various tenor slabs starting from 7 days going upto 10 years. This is the typical Deposit Rate Chart that you see displayed at bank branches and internet banking sites. For example, a deposit rate chart may show the fixed interest rates offered by a bank for the following tenor slabs: 7 days to 45 days, 46 to 90 days, 91 to 184 days, 185 days to less than 1 year, 1 year to less than 18 months, 18 months to 2 years, 2 years 1 day to 5 years, 5 years 1 day to 10 years.
Did you know?
Banks have to explicitly disclose the simple rate of interest per annum for the tenor of the deposit. They can additionally choose to show the annualised yield after compounding effects.
Pre-Mature Withdrawal: Since you agree to lock-in your money with the bank for the entire tenor of the Fixed Deposit, banks pay higher interest rates for Fixed Deposits. For certain product variants, the bank may allow you to take back the money before the end of the contractually agreed deposit tenor. Taking back the money from your Fixed Deposit before the end of its tenor is called pre-mature withdrawal. The bank may allow partial or full pre-mature withdrawal. In the case of pre-mature withdrawal, the bank does not pay interest at the contracted interest rate since the deposit did not remain with the bank for the contracted tenor. Instead, interest is paid at the rate corresponding to the tenor slab for which the withdrawn amount actually remained with the bank. The bank will most likely also impose a penalty for pre-mature withdrawal since the deposit did not remain with the bank for the contracted tenor.
Did you know?
Banks can charge a penalty for pre-mature withdrawal only if the components of penalty have been clearly brought to the notice of the
depositor at the time of acceptance of the deposit.
Overdue Deposits: After the Maturity Date of the Fixed Deposit, if the money is not paid out to or taken back by the depositor, the amount left unclaimed with the bank is referred to as an Overdue Deposit.
Did you know?
Overdue Deposits earn interest at the rate applicable to Savings Bank Accounts. If the contracted rate of interest on the matured deposit is lower than the interest rate on Savings Bank Accounts (this is unlikely), then the overdue deposit continues to earn interest at the contracted rate.
Maturity Instructions: One way to avoid lower interest on overdue deposits, is to provide clear instructions to the bank on what to do with the principal + interest amount of the deposit on maturity. Automatic Renewal is a useful option that instructs the bank to renew the deposit on maturity for the same tenor at the then prevailing interest rate. You can choose to renew both principal + interest amount or the principal amount only with the interest amount being transferred to your Savings Bank Account. You can, of course, choose to have the principal + interest amount transferred to your Savings Bank Account on maturity. Maturity Instructions can be provided to the bank at the time of placing the Fixed Deposit or upto a fixed number of days before the Maturity Date of the deposit.
Jargon Buster:
Form 15G and Form 15H: Interest income from Fixed Deposits (including from Tax Saver Deposits) is considered to be part of "Income from Other Sources" and taxed as per your Income Tax bracket. Tax Deduction at Source (TDS) is applicable above the threshold defined by Income Tax rules. If you do not want tax to be deducted at source, please submit Form 15G (15H for Senior Citizens) to the bank every financial year. Read more about taxation related matters for Fixed Deposits.
Loan or Overdraft against Deposits: Banks usually offer loans and overdrafts against Fixed Deposits by marking a lien on the Fixed Deposit that acts as a security for the loan or overdraft. Because of its low risk nature, banks are able to offer lower interest rates (compared to other loan products), flexible repayment schedules and require lesser documentation with faster turn around time for approval of such loans or overdrafts. Depending on their policy guidelines, banks restrict the loans or overdraft amount to a certain threshold (say, 90% of the deposit amount) with the interest rate typically 1% to 2% higher than the interest rate on your deposit and the loan tenor being restricted to the tenor of the deposit. As a depositor, availing a loan or overdraft can be a useful alternative to pre-maturely withdrawing Fixed Deposits but requires a careful evaluation of costs.
Important Note:
Our site lets you compare, across banks and tenors, the fixed simple rate of interest per annum offered to the general public (non-senior citizen) for domestic deposits less than Rupees 3 Crores where pre-mature withdrawal is allowed.