Understanding Fixed Deposits and FD Calculation Methods

CNN Central News & Network–ITDC India Epress/ITDC News Bhopal: Fixed Deposits (FDs) have long been a preferred investment option among Indian investors, providing a straightforward way to grow wealth with predictable returns. Shriram Finance, a trusted name in the NBFC space, offers investors an opportunity to grow their savings over a specific period at a specified interest rate. Fixed Deposits are designed to cater to a wide range of investor needs and goals and it is important to know how FDs work, the various FD calculation methods, and how Shriram Finance FD can be a beneficial choice for your investment portfolio.

Fixed Deposit

A Fixed Deposit (FD) is a financial instrument provided by banks and non-banking financial companies (NBFCs) where an investor deposits a lump sum amount for a fixed tenure at a predetermined interest rate. In both, cumulative and non-cumulative deposit scheme, the interest rate remains constant throughout the tenure, while in a cumulative deposit scheme, the investor receives the principal amount along with the accumulated interest at the end of the tenure and in a non-cumulative deposit scheme, the investor receives the interest payment in periodical intervals (based on his preference – monthly, quarterly, half-yearly, and yearly)

How Does a Fixed Deposit Work?

When you invest in an FD, the process begins with choosing the deposit amount, tenure, and interest payout option. The key features of an FD include:

Deposit Amount: The investor deposits a specific sum of money for a fixed period.

Tenure: The tenure of the FD can range from a few days to months to several years. The interest rate generally varies depending on the tenure, with longer tenures often offering higher rates.

Interest Rate: The rate of interest is fixed at the time of investment and does not change during the tenure, regardless of market fluctuations.

Interest Payout Options: Investors can choose to receive interest payouts periodically (monthly, quarterly, half-yearly, or annually) or opt for cumulative interest, where the interest is compounded and paid out at maturity along with the principal.