A fixed deposit (FD) is a time-bound savings product where you deposit a lump sum with a bank for a fixed tenure (7 days to 10 years) and earn a guaranteed interest rate. Your money is locked in — early withdrawal usually incurs a penalty of 0.5-1%.
FD rates in India range from 6.5% to 8.5% depending on the bank and tenure. Senior citizens typically get an extra 0.25-0.50%. A Rs 10 lakh FD at 7.5% for 5 years grows to approximately Rs 14.36 lakh with quarterly compounding.
Fixed deposits are the most popular savings instrument in India — banks hold over Rs 100 lakh crore in FDs. They are insured by DICGC up to Rs 5 lakh per depositor per bank. FDs are virtually risk-free (for insured amounts) but the returns may not beat inflation, making them better for capital preservation than wealth creation.