The Lesser-Known Facts about Fixed Deposit Interest Rates

Fixed deposit is probably the most popular investment option for Indian investors. Unlike investments in the stock market, fixed deposits are safer, reliable, and provide assured returns. However, choosing the right fixed deposit is not easy.

This article gives you a snapshot of fixed depositinterest rates and how you can select the best FD from a list of schemes.

The Types of Fixed Deposit Schemes and Interest Rates

To make their fixed deposit schemes appear attractive, financial institutions give different names to the plans. However, in essence, you can categories all fixed deposit schemes into two broad types – cumulative and non-cumulative.

In the cumulative scheme, you will get the principal, along with interest, at the time of maturity. The maturity period can start from 7 days and may go up to 10 years.

In the non-cumulative scheme, you can get interest payment as per the interval you select. Generally, institutions offer four types of periods for interest payment – monthly, quarterly, half-yearly, and annually. If you choose the monthly interest payment option, you will get the lowest interest rate.

Take a look at PNB Housing Finance interest rates to understand this better.

PNB Housing Finance offers a 7.50% interest rate for fixed deposit schemes of 72 months and above. The tentative yield to maturity can go up to a high 10.32%. If, however, you choose the cumulative fixed deposit scheme for 72 months and opt for the monthly interest, then the interest rate would be 7.10%. For the quarterly, half-yearly, and annual modes, the interest rate would be 7.15%, 7.20%, and 7.35%, respectively.

Hence, if you want to save for the future, then the cumulative fixed deposit schemes would suit you more. If, however, you need the money for meeting regular expenses, then opting for the cumulative option would make sense.

Fixed Deposit Schemes – Special Interest Rates

Most financial institutions offer an extra .10% to .50% interest rate for the special category of investors.

  • If your age is above 60 and you have documentary evidence to prove your age, then you may expect to get up to .50% additional interest rate.
  • If you are applying online, then a few financial institutions give you up to .10% additional interest rate.

Fixed Deposit Schemes – Premature Withdrawal

Generally, financial institutions want you to stay with them for the entire duration of your fixed deposit. However, there might be times when you would urgently require the funds.

Many institutions do not allow premature withdrawalbefore three months (in case of fixed deposits for 12 months’ and above). And, if you withdraw the entire fund before six months from the date of account opening, you might be paid a much lesser interest rate.

If you withdraw the amount after six months, but before the end of the deposit tenure, then you will get an interest rate that is 1% lower than the applicable interest rate for that duration.

For example, let us assume that you opened an FD on 01.01.2020 for 120 months at an interest rate of 7.50%. However, 60 months later, you feel that you would require the funds urgently. Considering the interest rate for 60 months’ to be at 7.15%, you would get a 6.15% interest rate.


With a continuous decline in deposit interest rates, investors are fast moving to alternative investment options like housing finance fixed deposit schemes. CRISIL FAAA-rated housing finance FD schemes are the safest investment schemes you can avail right now.