What is a fixed deposit?

It's a financial instrument offered by banks which gives investors a higher interest rate than a regular savings account until the maturity date. In the US, Canada and Australia it's known as a term deposit or time deposit, while in the UK and India it's called a bond.

Where have you heard about fixed deposits?

Fixed deposit (FD) accounts are especially prevalent in India. In July 2017, for example, The Times of India reported that small finance banks were giving better fixed deposit rates than the big lenders.

What you need to know about fixed deposits...

The defining criteria for a fixed deposit is that banks can refuse to repay FDs before the expiry of the deposit. If they do allow it, banks can charge a penalty for premature withdrawal. Some providers may offer additional services to FD holders such as loans against FD certificates at competitive interest rates.

The tenure of an FD can vary from 7 days to 10 years. Banks issue a separate receipt for every FD because each deposit is treated as a distinct contract. This receipt is called the Fixed Deposit Receipt, and has to be surrendered to the bank at the time of encashment.