Fixed Deposit Minimum Period

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Find out the minimum FD period for domestic and NRI Fixed Deposits

Key Takeaways

• With Fixed Deposits, investors can place larger sums in a high-interest-generating account.
• The minimum period of a domestic Fixed Deposit is 7 days.
• NRO FDs previously had a minimum tenure of 15 days, which has now been reduced to 7 days.
• NRE FDs have a comparatively higher minimum deposit period of 1 year.
• Premature withdrawals of FD before the minimum period may affect your interest earnings.

A Fixed Deposit (FD) yields higher interest than a Regular Savings Account. Once invested, you can forget about your investment until maturity. You can create an FD account anywhere, anytime, via mobile and internet banking. Fixed Deposits come with certain minimum investment periods. This article explains the FD minimum and maximum period based on its type.

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What are the different types of fixed deposit investments?

Different varieties of fixed deposits are available to meet different investing needs. Typical varieties consist of:

• Standard Fixed Deposits: The most fundamental kind, providing a set interest rate for a predetermined period of time.
• Tax-Saving Fixed Deposits: Under Section 80C of the Income Tax Act, these deposits are deductible from taxes.
• Recurring Deposits (RDs): These let you invest a certain amount on a regular basis, gradually growing a sizable corpus.
• Senior Citizen Fixed Deposits: Provide senior citizens (60+ years of age) with greater interest rates.

What is the Minimum Period of Fixed Deposit?

The minimum tenure for FD depends on the type of deposit, which could be:

Domestic Fixed Deposits

The minimum FD period of deposit for Domestic Fixed Deposit is 7 days. This duration, although small, can create significantly higher interest income on high-value FD amounts exceeding INR 15 lakhs. Interest on Domestic FDs is paid in INR.

NRO Fixed Deposits

Non-Resident Indians can open Non-Resident Ordinary or NRO FDs from funds parked in their NRO Accounts. An NRO FD is also predominantly treated like a domestic FD, and the interest rates, currency of interest payment, and investment durations are the same. Thus, the NRO Fixed Deposit minimum period is also 7 days.

NRE Fixed Deposits

Unlike domestic and NRO FDs with significantly low minimum deposit periods, the NRE Fixed Deposit minimum period is 1 year. Thus, it is higher than those offered on domestic and NRO FDs of the lowest investment duration. You can also open long-term NRE FD accounts with durations lasting up to 10 years.

FCNR Fixed Deposits

NRIs who wish to create Fixed Deposits from their foreign currency earnings can open Foreign Currency Non-Resident (FCNR) deposits. Like NRE FDs, the Fixed Deposit minimum period for FCNR FDs is 1 year. However, unlike all the other FDs mentioned above, banks pay interest in the currency of deposit, not INR.

Premature Withdrawal of Fixed Deposits

What is a premature withdrawal, and to which type of FD does it apply?

Premature withdrawal is the act of taking money out of a fixed deposit before the term is over. Usually, both regular fixed deposits and tax-saving fixed deposits fall under this category. Premature withdrawals from recurring deposits may be permitted by certain banks, but usually under certain restrictions.

You can opt for premature withdrawals regardless of the type of FD you open and the minimum time period for FD. However, you have to pay a penalty. The bank typically mentions the penalty amount at the time of the Fixed Deposit account opening. Furthermore, banks are not liable to pay any interest if you withdraw the deposit before the minimum maturity period.

NRIs returning to India and looking for premature closure of NRE Fixed Deposits can evade the penalty by converting the NRE FD to a Resident Foreign Currency (RFC) Account. On such FDs, the RFC FD interest rates will be applicable for premature withdrawals within the FD minimum period of 1 year. Also, NRIs should make such requests immediately upon returning to India. Banks may levy a penalty if you convert your NRE FD to an FCNR (B) Deposit before it has run its minimum maturity period course.

Conclusion

With FDs, you can place your idle cash in high-interest-generating accounts. You may make premature withdrawals but have to forfeit the potential interest earned. It would help if you held the FD until maturity to get the best value out of it.

If you prefer to save time and effort, and open an FD account remotely, then download DBS Bank app right away!

Frequently Asked Questions

1. Is there any FD for 3 months?

   Indeed, fixed deposits with terms as short as three months are available from certain banks. Short-term FD interest rates, however, are often lower than those on longer tenures.

2. Can NRIs open a short-term FD?

   In India, NRIs are able to open short-term fixed deposits. As per the relevant tax legislation, interest earned on these deposits is usually taxable.

3. Can I withdraw FD interest monthly?

   Although some banks provide choices for paying out interest, such as monthly distributions, this is usually not a common feature. At maturity, the most typical procedure is to credit the interest to the deposit account.

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*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.