Short Term Deposits - Features and Benefits Explained
Disclaimer: This blog contains generic information only. Please evaluate your financial goals before selecting the FD tenure.
July 06, 2024
If you have a short-term financial goal to meet, investing in short-term fixed deposits could help. For instance, if you think you need funds after a year to meet a specific goal, you can book an FD from 7 days to 12 months, earn interest and withdraw cash upon maturity.
In this article, we have highlighted the key features and benefits of short-term deposits.
Understanding Short-Term Deposits
Short-term deposits are a type of bank deposit that typically have a maturity term ranging from 7 days to less than 12 months. These deposits offer a higher rate of return than regular savings accounts, making them an attractive option for those looking to earn more on their savings in a shorter span of time.
Benefits of Short-Term Deposits
Now, let's take a closer look at the benefits that short-term deposits offer:
Transitory Savings
Short-term deposits could be a great option if you have transitory savings. For example, if you're saving for a down payment on a house or planning a vacation in the near future, a short-term deposit can help you earn more on your savings while keeping your funds easily accessible.
Higher Returns than Savings Account
One of the primary advantages of short-term deposits is the higher rate of return they offer compared to regular savings accounts. By investing your money in a short-term deposit, you can make your savings work harder for you and earn more interest over time.
Loan Facility
Callable FDs allow you to avail loans or overdraft against your deposit without requiring any additional documentation or a guarantor. This can be beneficial in times of financial need or when unforeseen expenses arise.
Key Features of Short-Term Deposits
Here are some characteristics of short-term deposits.
Nomination Facility
When you open a short-term deposit account, you have the option to nominate a beneficiary. This ensures that your loved ones will have access to the funds in case of any unfortunate event.
Security
Your deposit amount up to ₹5 lakh is insured under Deposit Insurance and Credit Guarantee Corporation (DIGCC).
Fixed-rate of Interest
The interest remains fixed throughout the deposit tenure. This ensured guaranteed or assured returns upon maturity irrespective of market conditions,
Auto-renewal Facility
Short-term fixed deposits are eligible for renewal, meaning if you don't withdraw the amount upon maturity, your deposit will get re-invested.
Types of Short-Term Deposits in India
Here are some of the types of short-term deposits in India
Fixed Deposits
Short-term fixed deposits offer higher interest rates than savings accounts and come with shorter deposit tenures.
Recurring Deposits
RDs allow you to save money in a disciplined way to meet short-term goals. However, the minimum deposit tenure is 6 months (for regular RD). You can withdraw amount before the maturity period, but you may lose out on the applicable interest rate.
Final Thoughts
Short-term deposits offer many advantages when it comes to liquidity and flexibility in managing your finances. They provide higher returns compared to regular savings accounts and allow you to access funds quickly when needed.
Looking to grow your savings? Ujjivan SFB offers a wide range of fixed deposit products. Select the FD of your choice and take a step forward to your financial goals. Alternatively, you can browse through Ujjivan SFB product suite - our wide range of financial products are designed to make your financial life better.
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