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Growing awareness about climate change has encouraged individuals and businesses to consider how their financial choices can support environmental sustainability. One such option is a green deposit. 

A green deposit works broadly like a conventional fixed-term deposit. You place money with an eligible bank or financial institution for a specified period and earn interest according to the agreed terms. The key difference is in how the institution uses the funds raised through these deposits. 

The proceeds of green deposits are earmarked for financing eligible environmentally sustainable activities and projects. 

The Reserve Bank of India (RBI) introduced its Framework for Acceptance of Green Deposits with effect from 1 June 2023. The framework aims to encourage the flow of funds towards green projects while introducing safeguards against greenwashing. 

Read on to understand the green deposit meaning, how it works, who can invest and the benefits you should consider before choosing one. 

What is a Green Deposit? 

A green deposit is an interest-bearing deposit accepted for a fixed period, where the proceeds are earmarked for allocation towards eligible green finance activities and projects. 

Under the RBI framework, green-deposit funds may be allocated towards areas such as: 

1. Renewable energy 

2. Energy efficiency 

3. Clean transportation 

4. Climate-change adaptation 

5. Sustainable water and waste management 

6. Pollution prevention and control 

7. Green buildings 

8. Sustainable management of natural resources and land use 

9. Terrestrial and aquatic biodiversity conservation 

The RBI framework applies to scheduled commercial banks, including small finance banks subject to specified exclusions, as well as eligible deposit-taking NBFCs and housing finance companies. 

Unlike a regular fixed deposit, therefore, a green deposit comes with an additional commitment from the issuer regarding the use of the funds raised. 

How Does a Green Deposit Work? 

A green deposit is similar to a conventional term deposit from the depositor’s point of view, but the institution follows a defined process for allocating the money. 

Here is how it broadly works: 

1. You place the deposit 

• You select the deposit amount and available tenure according to the financial institution’s green-deposit product. 

2. The institution pays interest 

• You earn interest according to the rate and other conditions agreed when opening the deposit. 

3. Funds are earmarked for green finance 

• The institution allocates the proceeds towards eligible environmentally sustainable projects under its green-financing framework. 

4. Unallocated money is managed separately 

• Until the funds can be allocated to eligible green projects, RBI permits regulated entities to temporarily park the proceeds in specified liquid instruments with a maximum maturity of one year. 

5. The institution reports on fund utilisation 

• The RBI framework contains requirements relating to disclosures, third-party verification or assurance and environmental impact assessment. 

An important point for depositors is that the institution must continue paying the agreed interest even if the proceeds have not yet been allocated to a green project. 

Who Can Invest in a Green Deposit? 

Eligibility for green deposits depends on the institution offering the product. 

Depending on the bank and deposit scheme, eligible depositors may include: 

• Resident individuals 

• Senior citizens 

• Hindu Undivided Families (HUFs) 

• Sole proprietorships 

• Partnerships and other eligible businesses 

• Societies 

• Clubs 

• Non-profit organisations 

• Companies and other eligible entities 

• NRIs, where specifically permitted by the issuer 

For example, ICICI Bank’s educational guidance on green deposits identifies individuals, HUFs, sole proprietorships, societies, clubs and non-profit organisations among the categories that may participate in such deposits. 

However, these categories should not be treated as universal eligibility criteria. Each bank or financial institution determines who can invest in its particular green-deposit scheme. 

You should therefore check the issuer’s latest eligibility, residency and KYC requirements before applying. 

Green Deposit Interest Rate 

There is no single green deposit interest rate in India. 

Rates depend on factors such as: 

• Bank or financial institution 

• Deposit tenure 

• Deposit amount 

• Callable or non-callable structure 

• Depositor category 

• Senior-citizen eligibility 

• Prevailing deposit rates at the time of investment 

Importantly, the RBI has clarified that its deposit regulations do not provide for a separate differential interest rate simply because a deposit is green. Interest must be paid according to the applicable deposit rules and agreed terms. 

Banks can still offer green-deposit products with specific tenures whose prevailing rates differ from other tenures. 

For example, SBI currently states that its Green Rupee Term Deposit is available for 1,111, 1,777 and 2,222 days at par with the applicable card rate, effective 1 May 2026. 

Another example is the Central Bank of India’s currently published Cent Green Deposit rates: 

Tenure	General Public	Senior Citizen
1,111 days	6.25% p.a.	6.75% p.a.
2,222 days	6.50% p.a.	7.00% p.a.
3,333 days	6.50% p.a.	7.00% p.a.

These are the rates currently displayed by Central Bank of India, with the general-public rates shown as effective from 10 December 2025. Deposit rates are subject to revision. 

Therefore, always check the financial institution’s official website for the latest rate immediately before investing rather than relying on an older comparison table. 

Advantages of Opting for a Green Deposit 

Green deposits combine characteristics of fixed-term deposits with a defined environmental use of the funds raised. 

Financial Returns 

Like other term deposits, a green deposit earns interest according to the rate agreed at the time of booking. 

Since the return is not directly linked to stock-market movements, it can provide greater predictability than market-linked investments. 

However, a green deposit does not automatically offer a higher interest rate than a regular FD. Compare the rates and tenures available before investing. 

Environmental Impact 

The primary differentiating feature of green deposits is the intended use of proceeds. 

Under the RBI framework, institutions offering green deposits must earmark funds for eligible environmental activities such as renewable energy, clean transportation, energy efficiency, sustainable water management and green buildings. 

This allows depositors to align a portion of their savings with environmental objectives without directly selecting individual green projects themselves. 

Fixed-Income Stability 

Green deposits can offer the predictable return structure associated with term deposits. 

However, their level of protection depends on the type of institution accepting the deposit. 

For eligible bank deposits, DICGC insurance currently covers principal and interest together up to ₹5 lakh per depositor per bank in the same right and capacity. 

This does not mean every product marketed as a green deposit has identical protection. In particular, the DICGC states that deposits mobilised by NBFCs are not covered by DICGC deposit insurance. 

You should therefore check the issuer as well as the deposit terms rather than assuming the word ‘green’ makes the product risk-free. 

Portfolio Diversification 

A green deposit can add a fixed-income and sustainability-oriented component to a broader investment portfolio. 

For example, an investor who holds equities, mutual funds or other market-linked assets may use term deposits as part of the relatively stable portion of the portfolio. 

However, a green deposit is still fundamentally a deposit product. Simply replacing a regular FD at the same bank with a green FD does not necessarily provide significant diversification by itself. 

Effective diversification depends on factors such as: 

• Asset classes 

• Issuers 

• Maturities 

• Credit exposure 

• Liquidity requirements 

• Investment objectives 

Supports Sustainable Finance 

Choosing green deposits may also encourage financial institutions to mobilise more capital for environmentally sustainable activities. 

The RBI framework requires regulated entities offering these deposits to have policies and financing frameworks governing the allocation of proceeds, helping make the use of funds more transparent. 

Benefits for Senior Citizens 

Some banks offer senior citizens an additional interest rate on their green-deposit products, similar to their treatment of other eligible term deposits. 

However, there is no universal additional rate of 0.25% or 0.50% applicable to every green deposit. 

For instance, Central Bank of India’s currently published Cent Green Deposit rates provide a 0.50 percentage-point higher rate for senior citizens across its three listed tenures. 

The exact benefit depends on the institution, tenure and product conditions. 

Things to Consider Before Investing in a Green Deposit 

While green deposits offer several benefits, consider these factors before investing: 

Limited Tenure Options 

Some green-deposit schemes are available only for specific tenures. 

For example, SBI’s Green Rupee Term Deposit currently offers three specific tenures – 1,111, 1,777 and 2,222 days. 

This may offer less flexibility than a conventional FD that provides a wider range of tenure options. 

Premature Withdrawal Rules 

The RBI’s green-deposit framework does not impose a general restriction on premature withdrawal. 

However, premature withdrawal remains subject to the normal deposit regulations and the issuer’s applicable product conditions. 

Depending on the deposit, early withdrawal may result in: 

• A lower applicable interest rate 

• Premature withdrawal penalties 

• Other conditions specified by the institution 

Check these terms before opening the deposit. 

Tax Treatment 

A green deposit does not automatically receive special tax benefits merely because the proceeds are used for environmental purposes. 

Interest earned is generally subject to the same applicable tax rules as interest from other similar deposits. 

Check the latest income-tax provisions or seek professional tax advice where required. 

Compare Returns 

The environmental purpose of a green deposit does not necessarily mean it offers better returns than a conventional fixed deposit. 

Compare: 

• Interest rate 

• Effective annual return 

• Tenure 

• Premature withdrawal terms 

• Senior-citizen benefit 

• Deposit insurance 

• Issuer creditworthiness 

before investing. 

Green Deposit vs Regular Fixed Deposit 

The main difference between a green deposit and a regular FD lies in how the financial institution allocates the money raised. 

Parameter	Green Deposit	Regular Fixed Deposit
Primary purpose	Funds are earmarked for eligible green activities and projects	Funds are available to the institution for general permitted banking or financing activities
Interest	Fixed according to applicable deposit terms	Fixed according to applicable deposit terms
Returns	Not automatically higher because it is a green deposit	Depends on issuer, tenure and deposit amount
Tenure	May be available only for specific green-deposit tenures	Usually available across a wider range of tenures
Environmental allocation	Yes	No specific green allocation requirement
Premature withdrawal	Depends on issuer and applicable deposit rules	Depends on issuer and deposit terms
Tax treatment	Generally follows applicable term-deposit taxation rules	Generally follows applicable term-deposit taxation rules
Deposit insurance	Depends on issuer; eligible bank deposits may receive DICGC coverage	Depends on issuer; eligible bank deposits may receive DICGC coverage

A green deposit may therefore appeal to someone who wants the characteristics of a term deposit while also directing funds towards environmentally sustainable finance. 

FAQs on Green Deposits 

1.Are green deposits a safe investment option? 

Green deposits issued by banks generally have the characteristics of conventional term deposits and are not directly linked to stock-market fluctuations. 

However, calling every green deposit completely risk-free would be inaccurate. 

Eligible bank deposits are covered by DICGC up to ₹5 lakh per depositor per bank, including principal and interest, subject to the applicable rules. 

Deposits accepted by NBFCs are not covered under DICGC deposit insurance. The safety of any deposit should therefore be assessed based on the issuer and applicable protections, not simply because it carries a green label. 

2.Can individuals participate in green deposit programmes, or are they only for businesses? 

Yes. Individuals can invest in green deposits where the institution’s scheme permits them. 

Depending on the issuer, green deposits may also be available to HUFs, businesses, societies, clubs, non-profit organisations and other eligible entities. 

Always check the specific scheme’s eligibility criteria. 

3.What is the minimum amount required to open a green deposit? 

There is no single minimum amount applicable to all green deposits. 

The minimum investment is decided by the institution offering the scheme. 

For example, Central Bank of India’s Cent Green Time Deposit currently specifies a minimum deposit of ₹50,000. 

Other banks may have considerably lower or higher minimum amounts. Check the current product terms before investing. 

4.Can I withdraw a green deposit before maturity? 

In many cases, yes. 

The RBI has clarified that its Green Deposit Framework itself does not restrict premature withdrawal. However, the normal rules governing the deposit and the issuer’s product conditions continue to apply. 

Premature withdrawal may lead to a lower applicable interest rate or a penalty, depending on the scheme. 

Some non-callable deposits may also have restrictions on early withdrawal. Therefore, check whether your green deposit is callable or non-callable before investing. 

5.What is the difference between a green deposit and a regular fixed deposit? 

Both are fixed-term deposit products where you deposit funds for an agreed tenure and earn interest. 

The main difference is the use of proceeds. 

With a green deposit, the institution earmarks the money raised for eligible green finance activities such as renewable energy, energy efficiency, clean transportation, waste management and green buildings. 

A regular fixed deposit does not carry this specific environmental allocation requirement. 

Apart from this distinction, features such as interest rates, premature withdrawal, senior-citizen benefits and deposit insurance depend on the financial institution and specific deposit product.

Investments are a smart solution for long-term wealth generation. Choosing a secure and easy-to-avail option can help you create a more balanced portfolio. Two options you can consider are the National Savings Certificate and fixed deposits. When you compare NSC and FDs, you may find that they both have several advantages and limitations. This is why choosing between them can be a tough decision.

Only after evaluating your investment objectives and their characteristics can you select the most appropriate option for yourself. Continue reading to discover more about the variations between the National Savings Certificate and fixed deposits. 

Overview of NSC Schemes

This is a fixed-income scheme backed by the government. It is designed for small to mid-income investors looking for long-term savings and secure returns. It comes with a 5-year lock-in period and a pre-determined interest rate. You can start investment with a nominal amount of ₹100. 

The following is the eligibility for NSC schemes, which you must know for comparison with FDs:

• Age: Anyone above 10 years of age can apply for this scheme
• Nationality: Any Indian citizen can apply  

The following entities cannot apply for NSC:

• Hindu Undivided Families (HUFs)
• Trusts
• Private and Public Limited Companies (PLCs)
• Non-Resident Indians (NRIs)

Eligibility for FDs

As you may know, it is a secure savings option that requires a lump sum investment. You can choose a preferred tenure according to which issuer gives you an interest rate. Most issuers charge a penalty on withdrawal before completion of tenure. Here’s a list of eligible entities who can book an FD:

• Residents
• Sole proprietorship firms, partnership firms and limited companies
• HUFs (Hindu Undivided Families)
• Trust accounts

NSC VS. Fixed Deposit

Here are the differences between NSC and FD schemes:

Topics	NSC	FD
Interest rate	7.7% at present	Varies between 2.50% and 9%
Compounding frequency	Yearly	Quarterly in general
Minimum Investment Amount	₹1,000	₹1,000 to ₹10,000, depending on the issuer
Maximum Investment Amount	No upper limit for investment	Depends on the bank or issuer, though most don’t.
Lock-in Period	Minimum 5 years	7 days to 10 years
Risk appetite	Low risk	Low to moderate risk
Tax Benefits	Qualifies for tax deduction under 80C	5-year tax-saver FDs offer 80C deduction
Premature Penalty	It has a penalty for premature withdrawal	Most banks impose penalties on premature withdrawals

A Comparative Study of NSC and FD with an Example

Assume you invested ₹1 lakh in an NSC and fixed deposit for 5 years. The following example shows your returns after 5 years. 

For National Savings Certificate:

• Capital: ₹1 lakh
• Tenure: 5 years
• Interest Rate: 7%
• Compounding frequency: Annually
• On maturity, the interest amount will be ₹40,255
• After claiming tax benefits, the maturity amount will be ₹1,40,255 

For fixed deposit, assume you have:

• Capital: ₹1 lakh
• Tenure: 5 years
• Interest Rate: 7% 
• Compounding frequency:  Quarterly
• The interest on maturity will be ₹41,478
• Maturity amount will be ₹1,41,478 (₹1 lakh + ₹41,478)

Note: The example above does not take the tax liability into account. Ensure you calculate your potential tax to calculate your actual returns. 

NSC or FD: Which is Better?

Both have their benefits and drawbacks, and here’s an overview to help you choose more efficiently.

• NSC: If you are looking for a long-term investment with a slightly higher return, then choose NSC schemes. This is a government-backed scheme, ideal for a low risk appetite. 
• FD: With a fixed deposit, you can potentially earn more with higher interest rates and have more flexibility in choosing the investment tenure. Alongside long-term investment options, you can also invest for short-term goals.

Based on your requirements, you can invest in NSC or a fixed deposit or both. 

Also Read: Term Deposit vs Fixed Deposit

FAQs on NSC vs Fixed Deposit

How is the tax treatment different for NSC and Fixed Deposits?

The interest in NSC schemes is reinvested through the lock-in period, so you only need to pay tax on the final year’s interest. Additionally, you can claim deductions under section 80C of the Income Tax Act. On the other hand, FD interests are considered earnings and are taxed as per your income tax slab. FDs also offer the same 80C benefit when you go for the five-year tax-saver option.

Which is better for long-term investment: NSC or Fixed Deposit?

The answer to this question completely depends on your investment objectives and post-tax returns. Usually, an FD is better if you want to invest for fewer than 5 years. If not, NSC may be a better option. Check your returns before you decide. 

Can I withdraw funds early from NSC and Fixed Deposits?

Premature withdrawal is simple when it comes to FDs, though an interest penalty applies in most cases. However, doing so is not easy in NSC, and it is only allowed in exceptional cases.

When it comes to risk-free investment, there are not a lot of options available that give outstanding returns. This is why it’s understandable why you may want help when comparing the features of FD vs PPF. These two lucrative options are not only secure but also suitable for long-term investment. 

Read on to get acquainted with their features and benefits to make a better selection between FD vs PPF. 

Guide to Public Provident Fund 

This savings scheme was established by the Ministry of Finance in 1968 and is supported by the government. It enables you to put your money in a non-market-dependent instrument for the long run to ensure your returns. Here are some of its features: 

• There is a 15-year lock-in period, and early withdrawals are allowed on meeting certain conditions
• The interest rates for this plan change every quarter 
• Right now, the rate is consistent at 7.1% annually for the third quarter of the 2024-25 
• It’s an optimal choice to grow your corpus for retirement or any other long-term goal

Guide to Fixed Deposit

Also called term deposit, this is a customisable investment option suitable for those with low-risk appetites. This is because its returns are not influenced by market fluctuations. Take note of its features for better understanding: 

• You need to invest a lump sum amount, which should be equal to or more than the minimum requirement of the financial institution
• You stay invested for a fixed tenure, between 7 days and 10 years, depending on your preference
• Banks, housing finance companies and non-banking financial companies offer variable interest rates for different tenures and principals 
• The rates beat the returns offered by savings accounts
• Apart from a few exceptions, you can withdraw money anytime, but you may need to pay a penalty, which decreases your total returns

Difference Between PPF and FD

Now that you have a basic understanding of these two savings options, here are some ways to compare FD vs PPF and make a decision:

Parameter	Public Provident Fund	Fixed Deposit
Eligibility Criteria	Anyone over the age of 18 years can open an account for self or a minor	Anyone over the age of 18 years can open an account, and guardians can open an account on a minor’s behalf
Interest Rate	The interest rate is set by the government and is subject to period revision; the current rate is 7.1% p.a.	Varies for all banks and financial companies and currently ranges between 2.50% to 9.00% p.a. with 0.25% to 0.75% additional rates for senior citizens
Liquidity	Low accessibility as you cannot withdraw your funds for at least 5 years and only partial withdraw after 5 years	Most financial institutions allow you to make premature withdrawals with a penalty of 0.5% to 1% or more on your total interest
Lock-in period	It comes with a lock-in period of 15 years	Tax-saving FDs have a lock-in period of 5 years
Maximum Tenure	You must stay invested for a 15-years to avoid  premature closure penalties	You can choose any tenure between 7 days to 10 years, depending on your investment goals
Minimum Investment	You can start with a minimum investment of ₹500	The minimum deposit amount varies and usually starts from ₹1,000
Maximum Investment	You can invest up to ₹1.5 lakh a year	There is no set maximum limit; it depends on the financial institution and may go up to crores
Taxation	It falls under the exempt-exempt-exempt (EEE) category, so you can enjoy tax benefits on investment as well as return and maturity amount	The interest attracts tax as per your slab as well as TDS of 10% if it’s over ₹40,000 for regular citizens and ₹50,000 for senior citizens, but you can claim a deduction on investments up to ₹1.5 lakh under Section 80C of the IT Act

Which is Better: PPF or FD

Although both options are dependable and safe, it is important to select the one that aligns with your investment goals and capability. 

• PPF is the right option if you can stay invested for a longer tenure or aim to grow funds for a long-term goal
• Fixed deposit is a better choice if you want flexibility, shorter tenure and higher liquidity

To plan for either of these, start by analysing your needs and compiling a list of the objectives you want to meet with your investment. Once done, you can compare FD vs PPF in terms of benefits, rules and restrictions, returns and other factors to choose the better option for yourself. 

FAQs on FD vs PPF

How is the maturity period different for FD and PPF?

For a fixed deposit, you can choose a tenure between 7 days and 10 years, depending on your financial goals. But for PPF, the maturity period is fixed at 15 years. You can reinvest for an added term of 5 years. 

What are the withdrawal rules for FD compared to PPF?

Most issuers allow you to make premature withdrawals before the tenure ends. However, you must pay an interest penalty which reduces your payout. With PPF, you cannot make any withdrawal before 5 years. 

What happens to FD and PPF upon the account holder’s death?

In both options, the nominee can claim the account after maturity.

Throughout the years, numerous new opportunities for investment have emerged that offer high returns. Nonetheless, there are limited alternatives that offer the same level of security as fixed deposits offered by banks and the Post Office. By comparing Post Office vs bank FD interest rates, you can opt for the best option as per your long- and short-term goals. 

With this investment, you don’t have to worry about the fluctuating market as both savings schemes preserve your capital and offer a fixed rate of interest. This is the reason why the popularity of bank and Post Office FDs remains evergreen, making them a reliable option for the risk averse. Read on to learn more about both options in detail.

Guide to Bank FDs

As the name suggests, when you open an FD account in a bank, it is called a bank FD. A fixed deposit requires you to invest at least the minimum specified by the financial institution in a lump sum for a chosen period. Once the tenure ends, you get the deposited amount, along with earned interest, which is usually credited to your bank account.

You can also choose to earn interest as regular payouts based on your needs and the frequency offered by the bank. This secure investment option gives better returns than a savings account. Here are the key features of a bank FD:

• Interest rates differ across banks and tenures
• Offers capital preservation
• Has flexible tenures
• Offers loan and overdraft facility
• Tax benefits when you choose a 5-year tax-saver FD 

What is a Post Office FD?

This fixed deposit, called the Post Office Time Deposit, shares some similarities to regular FDs. You can invest funds in your nearest post office for a certain period. You will receive your capital along with added interest at maturity. Since it is a government instrument, you get the advantage of the sovereign guarantee, which boosts your safety. 

Unlike the bank FDs, whose rates vary across institutions, you get a fixed interest rate on all post office fixed deposits in India. These interest rates only vary as per the tenure. Longer investment tenures have higher interest rates and vice versa. The following table shows the updated rates offered as of March 2024. 

FD Investment Tenure	Interest Rate
1 Year	6.9%
2 Years	7.0%
3 Years	7.1%
5 Years	7.5%

Disclaimer: These interest rates are current as of March 2024, but may be subject to change. Check the latest rates before you invest. 

Here are some other features of PO FDs:

• Anyone over 18 years of age can open individual or joint accounts for up to 3 adults
• Guardian can book FDs for minors over the age of 10 years
• You can start with a minimum deposit of ₹1,000 with the subsequent deposit in multiple of ₹100 with no upper limit
• You can get tax exemptions when booking a tax-saver FD for 5 years 
• The lock-in period is 6 months 
• If you prematurely withdraw your FD before 1 year, your interest will be reduced to the savings account rate offered by the post office

Post Office Fixed Deposit vs Bank Fixed Deposit

Here is a brief overview of the differences between these two options, so you can choose the ideal savings scheme:

Factors	Post Office FD	Bank FD
Interest Rates	Offers an interest rate of 6.9% to 7.5%	Offers interest between 2.50% pa to 9.00% p.a., based on the bank and tenure
Investment Ease	Requires a visit to your nearest  post office	You can visit your bank, use your bank’s mobile app or website to book the FD
Minimum and Maximum Required	You can get started with ₹1,000 without any maximum limit	The deposit limit varies from one bank to another and is usually ₹10,000
Rates for Senior Citizens	No added benefits for senior citizens	Banks offer 0.25% to 0.65% higher interest rates for senior citizens
Investment Timeline	You can invest for 1,2, 3 or 5 years	You can choose a comfortable tenure between 7 days and 10 years

Similarities Between Bank FD and Post Office FDs

Though there are a few differences, there are also similarities between these two secure investment options, such as:

• Premature Withdrawal Options: You can withdraw your money prematurely with an interest rate penalty 
• Tax Benefits: Both schemes are subjected to tax deductions under section 80C of the Income Tax Act for the investment amount; the interest earned on both is taxable as per your slab
• Risk Appetite: FDs, in general, are low-risk investment options
• Flexible Investment: Either option allows you to choose the tenure as per your flexibility and goals, though post offices have limited options as compared to bank
• Loan Facility: In case of emergency, you don’t need to withdraw your FD, as you can get a loan against both FDs 

FAQ on Post Office FD vs Bank FD

Post office FD or bank FD, which is better?

It can be a tough call to choose between these two; however, compare post office vs bank FD interest rates and tenures to make your decision.

Given the popularity of fixed deposits, many financial organisations have introduced their own corporate FDs. These include:

• HFCs (Housing Finance Companies)
• NBFCs (Non-Banking Financial Companies)

Their concept remains the same: you deposit your money for a certain term and get steady interest on your investment. While the plus point is that company FD rates may be higher than banks, the only fact to be cautious about is your exposure to risk. Read on to get clarity about investing money in such deposits. 

Guide to Corporate FDs

Just like banks, registered NBFCs and HFCs also offer fixed deposits to get access to funds and offer secure returns. Like regular FDs, you invest a significant amount for a fixed period at an agreed interest rate. These FDs are not as secure as they are not insured up to ₹5 lakhs by the DICGC (Deposit Insurance and Credit Guarantee Corporation) unlike FDs offered by banks. They are, however, lucrative options as corporate FD rates are relatively higher, which is why they offer better returns.

Key Features of a Corporate or Company FD

When you opt for a corporate FD, you can get significant returns. However, it is best not to opt for the first issuer you come across. Instead, look for these features when searching for the best organisation for your term deposit:

• Credit Rating

Corporate FDs come with a rating by recognised agencies like CRISIL, ICRA and CARE. These ratings show the credibility of the organisation. Thus, it’s best to choose the financial institution with the highest rating to reduce your risk and invest stress-free. 

• Interest Payment Options

Like banks, corporate FDs also have various interest payout options. You can sign up to receive your gains every month, quarter, year or twice a year. The rates you get differ based on the payout frequency you choose. 

• Premature Withdrawal

Most corporate FDs offer premature withdrawal after 3 months of tenure. However, this incurs penalties in terms of the interest rate applied to your deposit. 

In conclusion, to pick the best company fixed deposit, you must assess these important features:

• Credit rating
• Corporate FD interest rate
• Investment tenure
• Premature withdrawal charges
• Company reputation and track record

Also Read : Short Term FD vs Long Term FD

Latest Corporate FD Rates

Here are some top company fixed deposit interest rates that you can compare before proceeding: 

Corporate FD	Maximum FD interest rate for Regular Citizens	Maximum FD interest rate for Senior Citizens	Credit Rating
ICICI Home Finance	7.95% p.a.	8.20% p.a.	CRISIL AAA/CRISIL PPMLD AAA/Stable
LIC Housing Finance Ltd.	7.25%	7.50	CRISIL AAA/Stable
Mahindra Finance	8.05%	8.30	CRISIL AAA/Stable
Muthoot Capital Services Limited	9.91	10.41	CRISIL A+/Stable
PNB Housing Finance Ltd.	8.85	9.15	CRISIL AA+/Stable
Shriram Finance	9.40	9.90	CRISIL AA+/Stable
Sundaram Home Finance	7.90	8.25	CRISIL AAA/Stable

Disclaimer: These rates are current as of November 2024 and are subject to change. Please check the latest rates before you invest.

Similarities and Differences Between Corporate FD and FD Offered By Banks

To make an informed decision, check out the differences between these two options and invest based on returns, safety of your capital and ease of premature withdrawal. 

Parameters	Bank FD	Corporate FD
Potential Returns	Banks offer lower interest rates in comparison, which result in relatively lower returns	Corporate FD rates are relatively higher than bank FD rates, which offer higher returns
Risk Factor	These FDs are insured by the DICGC and are very safe	Corporate FDs have a relatively higher risk but you can check the FD rating before investing
Investment Tenure	Banks FDs may have a more extensive tenure, starting from 7 days to 10 years	Corporate FD tenures start from 6 months and can go up to 5 years in general
Premature Withdrawal	Your interest rate may be reduced by 0.5-2%	Your interest rate may incur a 2-3% penalty

While there are some differences, both types of FDs do share  certain similarities, such as:

• Capital Preservation and Guaranteed Returns

Both corporate and bank FDs keep your capital away from market forces and offer assured returns. This feature is the reason for the popularity of this investment option.

• Higher Interest Rates for Senior Citizens

Both bank FDs and corporate FDs offer interest rate hikes to senior citizens. This helps those over 60 to have a reliable savings option with the ability to choose monthly payouts to finance life post retirement. 

• Flexibility of Investment Tenure

In both cases, you can choose how long you want to stay invested. This gives you the flexibility to choose the tenure as per your financial goal. 

Now that you know how these deposits differ, you can choose the right one. To make the most of corporate FD rates, try staying invested for a longer tenure.

FAQS on Corporate Fixed Deposit Rates India

Is it possible for NRIs to invest in company fixed deposits?

Yes, NRIs can also invest in fixed deposits with NRE or NRO FDs.

A fixed deposit comes with a lot of benefits, acting as a lucrative tool to invest your savings securely while generating interest. In addition, it can also help you in arranging funds for financial emergencies or to build your credit score via a loan against FD or a secured credit card. Financial institutions also offer an overdraft against FD.  

This is an affordable alternative to getting a personal loan, which you can use without any restriction. By understanding what OD against FD means, you can compare options and choose the best one.  

What is OD against FD?

Having an FD account enables you to take different types of credits against it. One such option is an overdraft (OD) facility. Getting an overdraft on a fixed deposit requires you to pledge your FD, and the financial company will sanction 90% to 95% of your FD amount as credit.

To understand the process better, say you have an FD of ₹2 lakhs, and you need immediate funds. Instead of getting a loan, you apply for an overdraft facility where the bank is offering 90% of your fixed deposit as OD. Since 90% of ₹2 lakhs is ₹1.8 lakhs, you get the amount instantly without breaking your FD.  

This is a secured credit option where you will have to use your fixed deposit as collateral. However, unlike other secured loans, you don’t repay in full EMIs. It also does not attract interest on the total loan amount. Instead, you will have to pay interest only on the borrowed amount for the duration for which you are using the funds.  

Assume you have access to an overdraft of ₹1.8 lakhs, but you only used ₹1 lakh for 5 months. In this case, you only have to pay interest on ₹1 lakh for 5 months. Another noteworthy feature is that you can close your OD anytime without any prepayment charges. 

Who Can Apply for It?

To avail of this facility, you need to meet the following requirements:

• You must be the primary FD account holder
• The FD should meet the minimum amount criteria set by the bank
• The FD tenure should match the requirements of the financial institution 
• The FD will be marked with a lien
• Your KYC should be completed
• The FD should not already be pledged as security for another type of credit 

There are two types of deposits that are ineligible for OD: 

• A fixed deposit for a minor 
• A 5-year tax-saver FD

Loan Limit on Overdraft against FDs in India

When it comes to making the most of this facility, getting the maximum credit is valuable. Here’s a list of India’s most popular banks and their limit on overdraft against FD.

Bank	Overdraft Limit
State Bank of India	90% of the FD value
ICICI Bank	90% of the FD value
Bank of Baroda	90% of the FD value
Axis Bank	85% of the FD value
HDFC Bank	90% of the FD value
Citibank	90% of the FD value
Kotak Mahindra Bank	90% of the FD value
Yes Bank	90% of the FD value
Punjab National Bank	Minimum ₹25,000 to maximum ₹50 lakhs

Disclaimer: These details are current as of November 2024 and are subject to change as per the bank’s policy. Check the latest information before you apply for it.

How to Apply and Close Your OD against FD

To successfully apply for overdraft against FD, you can follow these steps: 

1. Open your internet banking
2. Log in with your credentials
3. Go to the ‘Fixed Deposit’ section
4. Select ‘Open OD against FD’
5. Enter your overdraft amount and other details  
6. Follow the instructions as mentioned on the dashboard 
7. Read and agree to the terms and conditions

For the offline application, visit the bank branch to fill out the form. After that, you must provide your fixed deposit receipt. On approval, the amount will be credited to your account.

The process doesn’t end here as you must also close your overdraft on a fixed deposit and remove the lien marking from your FD. For that, you need to follow these steps:

1. Repay the outstanding amount within the selected tenure
2. Check the final statement and confirm the outstanding balance is zero
3. Submit your closure request along with the mandatory documents
4. Wait for the bank to release the lien from your FD
5. Receive confirmation letter from the bank  

While this option is a quick and easy solution to get credit, read all the product details carefully, as you have to pay interest. If you are looking to book an FD, choose the financial institution offering maximum overdraft on a fixed deposit to put yourself in a better position to address an emergency.

FAQS on Overdraft against Fixed Deposit

Can I take an overdraft against a joint fixed deposit account?

Yes, you can take an overdraft against FD with joint account holders. There are only two limitations to this, which are:

• A minor fixed deposit account holder cannot get an OD
• 5-year tax-free FDs are not eligible 

What happens to my fixed deposit if I fail to repay the overdraft?

Initially, the lender will add interest to your fixed deposit. In case you still cannot pay the borrowed amount, the lender may have to take strict action leading to dissolving your FD to recover dues.

Using the fixed deposit monthly interest payout ensures financial stability and constant cash flow. Non-cumulative FDs allow you to reap these benefits. With periodic access to gains, you can get a second source of income while employed or during retirement. 

Read on to know what a monthly interest payout fixed deposit is, the rates of reputed banks, its perks and how to choose one. 

What is a Non-cumulative FD? 

To book an FD, you need to make a lump sum deposit and choose your preferred tenure and payout option. Once the tenure ends, you get the total deposit amount back. If you choose to get the payout every month instead of at the end of the tenure, non-cumulative FDs are the best option.

Most financial companies allow you to choose an FD with a monthly payout along with quarterly, bi-annual or annual payouts. Depending on your financial requirements, you can choose the required frequency.

How To Calculate Monthly Payouts

To calculate your monthly interest, banks use this formula:

P(1+R/N)^N*T

Here, P stands for the initial invested amount, R is the FD monthly interest rate, T is the total chosen tenure, and N is the frequency of the payout. For monthly payout, the frequency will be 12. With this formula, you will get the total interest earned on the deposit. After dividing the amount by 12, you will get the monthly earnings. 

However, keep in mind that the rates for monthly payouts are different in comparison to those for annual payouts or those applied to cumulative deposits. The best way to proceed is to use the FD interest calculator on the issuer’s website or mobile app. For instance, say you plan to invest ₹1,00,000. 

FD Monthly Interest Rate	Tenure (in months)	Monthly Interest Earnings (in ₹)	Total Interest Earnings (in ₹)
6.70%	12	555	6,663
7.25%	18	601	9,028

Disclaimer: These results have been generated using an online FD calculator and are for illustrative purposes only. 

As you can see, the rate for monthly interest for 12 months is 6.70% and the rate of investing for 18 months is higher at 7.25%. Based on this, you can see your monthly earnings and compare them to take the right call. An FD calculator is digital and offers instant and accurate results that help you decide better. 

By choosing the senior citizen tab on the FD calculator, you can also check if the monthly FD interest for seniors is higher. Taking the same example as above of investing ₹1,00,000 in an FD with monthly payouts, check out what you may earn:

FD Monthly Interest Rate	Tenure (in months)	Monthly Interest Earnings (in ₹)	Total Interest Earnings (in ₹)
7.20%	12	596	7,157
7.75%	18	642	11,550

Disclaimer: These results have been generated using an online FD calculator and are for illustrative purposes only. 

As you can see, you can increase your monthly gains by investing for a longer time frame. Use this calculator to forecast your gains before you finalise your investment. 

Also Read: Short Term FD vs Long Term FD

Advantages of Monthly FD Payout 

When you choose an FD with a monthly payout, you get access to your returns every month. Considering that, here are some benefits you can enjoy:

• Additional Funds

With non-cumulative FDs, you get an extra source of income. Since the FD interest rate is better than the rate offered by a savings account, you can earn well and put your surplus funds to good use. 

• Cash Flow Flexibility

The monthly FD interest you earn can increase your purchasing power, giving you better cash flow. This is an ideal option to get passive income and elevate your lifestyle.

• Reinvestment 

With the monthly interest, you can start a new investment. If you have a loan, you can also use this money to pay your EMIs. 

• Retirement Financing 

With a lump sum deposit, you secure your golden years by using it to finance your daily living and medical expenses.  

• Predictable Income Source

With this type of FD, you get a fixed monthly return. Thus, you can easily manage your budget to meet fixed obligations. This way, you are not dependent on your savings or job and reduce the risk of premature withdrawal. 

FAQs on Fixed Deposit Monthly Interest

Is there a minimum deposit amount required to receive monthly interest payouts?

Yes, most banks have a minimum investment amount whether you want to book a fixed deposit with monthly interest payout or receive the gains at maturity. 

Is the monthly interest guaranteed regardless of changes in interest rates?

Yes, the monthly FD plan gives you a fixed income throughout the chosen tenure. During this time, your interest rate remains the same as FD rates are not linked to the market. 

Can I change my payout frequency from monthly to yearly after the FD is opened?

Some banks allow you to switch from monthly payout to other options. However, it is important that you clarify this before making the deposit or by reading the terms and conditions. 

While you’ve just started working or are nearing retirement, investing in FDs offers security and allows diversification of risk. Being aware of certain fixed deposit rules and regulations can help you plan your investment better. While FDs are fairly simple, allowing you to invest a fixed amount for a fixed time to get a fixed return, they do follow certain guidelines of the financial company that offers it and the RBI. 

To learn more about fixed deposit rules and regulations, read on. Only by understanding these can you learn what options you can avail with FDs and what limitations you will have to strategise for. 

Basics of Fixed Deposits

A fixed deposit is a type of investment that requires you to invest a lump sum amount for a certain period. During this time, you ideally do not withdraw your money and get an interest payout. 

You can either choose to get this payout when the FD matures at the end of the tenure or at regular intervals. If you choose to get the gains at the end of the maturity period, you stand to earn more due to higher interest rates and the principle of compounding interest. These basic fixed deposit rules and regulations make it easier for you to preserve your capital.

There are various types of fixed deposits which you can choose based on your preference. These are:

• Standard FD: Where the investor is below 60 years of age and gets the applicable interest offered by a bank
• Senior citizen FD: Where the investor is above 60 years of age and gets an interest rate hike
• Flexi FD: Where your FD is linked to a savings/current account and offers more liquidity at slightly lower interest rates
• Tax-saving FD: Where your FD is invested for 5 years and offers a tax deduction
• Corporate FD: Where the issuer is a corporate and the interest rates may be higher than an FD offered by a bank 

You can take into account your investment goals to choose which FD is best for you. FDs are a widely popular investment option, and these features explain some of the reasons why:

• You can invest for 7 days and up to 10 years
• Your investment may compound periodically
• Your returns are not linked to the market which offers greater security 
• Senior citizens get a higher interest rate
• You can invest as low as ₹5,000 or more than ₹3 crore – the choice is yours
• On maturity, you can reinvest the same amount or use it for other goals 

General Guide to Fixed Deposits

When booking an FD, consider the general fixed deposit rules and regulations to know what you can expect from this investment. The fixed deposit rules related to TDS and taxes will especially come in handy when you plan your portfolio. 

Features	Rules
Minimum and Maximum Deposit Amount	The minimum amount needed is ₹5,000 in general and the range can go up to what you prefer and can afford
Tenure and Premature Withdrawal	The minimum investment period is 7 days and the maximum is 10 years
Interest Rates	It may range between 3.5%* to 8.5%*, and it varies across financial companies based on the invested amount and tenure
Tax Implications	You will pay tax on the interest income from an FD
Nomination Facility	RBI mandates that there should be a nominee for your FD
Tax Deducted at Source (TDS) on Interest Income	If your income exceeds ₹40,000, then TDS will be applicable[For senior citizens, TDS applies when interest income crosses ₹50,000]
Auto-renewal	The FD may be auto renewed after maturity
Exemption Under Section 80C	You can avoid the tax on the amount you invest in a tax-saving FD (5 years) up to ₹1.5 lakhs
FD as Collateral	You can get credit against your FD like a credit card, loan, etc.
Early Withdrawal Penalties	While tax-saver FDs do not allow premature withdrawal, you can withdraw other FDs prematurely on paying an interest rate penalty

*Disclaimer: FD interest rates may change across issuers based on their policy. Please check the latest rates before investing. 

Read Also: Short Term FD vs Long Term FD

Fixed Deposit Joint Account Rules

You can also open an FD jointly with a member of your family or business. Remember that the joint fixed deposit rules are also the same as a regular FD with some added clauses related to withdrawal:

• ‘Either or survivor’ clause – Any depositor can operate the FD individually, even if the other is no more
• ‘Former survivor’ clause – Only primary depositor can operate it until he or she is no more; at this time, the other depositor/s can access it 
• ‘Anyone or survivor’ clause – Any joint account holders can operate it
• ‘Nominee’ clause – As per this joint fixed deposit rule, the nominee can operate it once the survivor is no more

New RBI Rules on Fixed Deposits

Here are a few fixed deposit rules that will be implemented from January 2025 on FDs offered by NBFCs and HFCs. Most of these new FD rules are related to premature withdrawals, nomination and notification, such as:

• For small deposits of under ₹10,000, premature withdrawal will be interest-free when requested before 3 months of the date of acceptance of the FD 
• To finance clinical illness, you can withdraw the principal amount without any interest when needed 
• For public deposits, 50% of the principal up to ₹5 lakhs can be withdrawn if requested in less than 3 months of the date of acceptance of the FD, and no interest will be paid on this; the remaining balance will accrue interest at the agreed-upon rate 
• Non-banking Financial Companies need to inform you of the completion of the nomination form, any changes made or its cancellation, as the case may be
• The notification period for informing depositors of their FD maturing NBFCs has been reduced from 2 months to 14 days before maturity 

In India, there are various ways in which you can increase wealth, and fixed deposits are the most popular savings scheme as they offer security and growth at the same time. Keep these rules and guidelines in mind when booking your FD to make the most of it.

In India, very few other options give you the flexibility and safety of investment like a fixed deposit. Within them, comparing the features of a cumulative vs non-cumulative FD can help you make a choice that either increases your returns or your liquidity. 

If you are thinking of a long-term investment, consider a cumulative FD. If you prefer periodic returns, start a non-cumulative FD. To understand these two highly popular FD options, read on.

What is a Cumulative FD?

If you are planning for the long term or want to deposit a considerable amount for safekeeping while earning interest, then you should consider these FDs. With them, you can benefit from compounding interest over the tenure and get the interest amount along with your capital at maturity. 

 In this way, your money continues to grow without any need to monitor it. Now that you know the meaning of cumulative FD, here are its benefits:

• It is a great option for long-term goals
• It is a convenient way to build your wealth
• It offers higher returns

What is a Non-Cumulative FD?

If you are looking for periodic earnings, then a non-cumulative FD is your best choice. With it, your invested amount earns interest on a monthly, quarterly or yearly basis. You can also choose to receive your payout bi-annually. This means you have greater liquidity for recurring expenses as you can access your interest gains without waiting for the FD to mature. To make up for this benefit, the interest rate is lower. 

Here are its benefits:

• It offers you a steady income
• Ideal for managing post-retirement expenses 

Also Read : Callable Vs Non Callable FD

Cumulative and Non-cumulative FD Differences

Here’s a brief overview of what each of these options offers in terms of payout and other factors so you can make the right call. 

Differences	Cumulative FD	Non-cumulative FD
Interest Rate	Relatively higher than non-cumulative FDs	Relatively lower than cumulative FDs
Payout Timeline	Paid on maturity	Paid periodically
Best Suited For	Long-term financial goals	Periodic earning

Factors to Consider Before Booking a Deposit 

Cumulative and non-cumulative FDs have different features and benefits, and only you can pick which one is ideal for you. Here’s a list of the factors that can help you decide between the two:

• Understand Your Financial Objectives 

If you are looking for long-term savings, then a cumulative FD is a great tool; however, if you want regular income, you should consider non-cumulative FDs.

• Consider Your Desire For Liquidity

If you can manage your finances without needing to withdraw the FD investment for however long you wish to invest, go for the cumulative option as it offers higher returns. 

If you need to pay bills or recurring expenses with the interest earnings, choose a non-cumulative FD.

• Compare Interest Rates

While picking which FD would be better, consider the prevailing interest rates of the financial institution for both options. In this way, you make an informed decision by comparing the gains.  

• Consider the Investment Tenure

While investing you must think about the tenure you can invest your money for. Cumulative FDs can give you higher returns as the interest is compounded for the entire tenure. Non-cumulative options will offer the same return despite the tenure.

Cumulative and non-cumulative FDs are a great way to invest any extra funds or savings you have. This is because they come with lower risk and offer better returns compared to a savings account. 

FAQs on Cumulative and Non-cumulative FDs

How does interest payout differ in cumulative vs non-cumulative FDs?

In cumulative FDs, the interest you earn is added to your capital. This way, it continues to grow through compounding interest. In a non-cumulative fixed deposit, your interest will be credited to your account, and you can access it before maturity at intervals of your choice. 

Which option is better for monthly income: cumulative or non-cumulative FD?

For monthly income, the non-cumulative deposit is a better option. It allows you to access the interest payout at regular intervals, be it monthly, quarterly or annually. 

Can I switch from a non-cumulative FD to a cumulative FD during the tenure?

This depends on the financial institution where you have made the deposit. If it permits,  you can convert your non-cumulative fixed deposit to a cumulative option during the tenure. If not, then you can reinvest the amount in an FD of your choice after the completion of the tenure.

All bank’s FD interest rates are dynamic and evolve with time. Depending on your preferred bank’s policy and other factors, it changes for every deposit you make. These rates are mentioned on the official website of the bank, which allows you access to complete data to estimate your returns. 

This way, you can compare multiple issuers’ rates and select the most favourable type of FD. To begin, you should understand how financial institutions offering fixed deposits calculate your FD interest. Read on to know which bank is best for fixed deposits, factors that affect it, how to choose and more.

Factors Affecting FD Interest Rate

Before knowing the best bank for fixed deposit in India, you should know how financial companies decide your FD rates. Here are the parameters:

• Tenure

This is the most common and visible factor that can increase or decrease your interest rate on a term deposit. In general, a longer tenure gives you a higher interest rate while making a deposit for a shorter tenure earns you low interest. Some banks may offer special tenures for which you can earn a higher rate, so watch out for those.  

• Investment Amount

A larger deposit can earn you a higher interest. As such, deposits up to ₹3 crore will attract lower interest as opposed to deposits over ₹3 crore, even if you choose the same tenure. 

• Age 

If you are investing in a senior citizen account, you can get an additional rate of hike to 0.25% to 1% or more based on the bank. 

• Repo Rate

Banks do not have the liberty to choose any interest rate on their own. They must adhere to the RBI policy to calculate the interest rates based on the repo rate. If the repo rate is higher, FD rates will also be high and vice versa. 

• Inflation

To combat inflation, the RBI may increase the repo rate. This may lead to higher FD rates, so investing in this climate can be a good decision. 

• Fixed Deposit Type

When you choose a tax saver FD, your invested amount is locked in for 5 years. To compensate for this reduced liquidity of your funds, banks offer you are higher interest rate. In some cases, you can get the highest FD rates in banks by investing in tax-saving FD for 5 years instead of the maximum tenure of 10 years. Similarly, investing in a cumulative FD gives you higher rates than a non-cumulative FD. 

• Premature Withdrawal 

When you withdraw your funds after the completion of the tenure, most banks charge a penalty. This can reduce your interest rates by 0.5% to 1%, reducing your overall earnings.

Some of the Top Banks’ FD Interest Rates

Now that you know the factors that dictate how you can earn the maximum returns, you can make informed decisions. To simplify your search, here are some banks with the best fixed deposit rate for FDs of less than ₹3 crores:

Banks	Interest Rate for Regular Citizens		Interest Rate for Senior Citizens
	Minimum	Maximum	Minimum	Maximum
Axis Bank	3% p.a.	7.25% p.a.	3.50% p.a.	7.75% p.a.
Bank of Baroda	4.25% p.a.	7.15% p.a.	4.75% p.a.	7.65% p.a.
Canara Bank	4% p.a.	7.25% p.a.	4% p.a.	7.75% p.a.
HDFC Bank	3% p.a.	7.40% p.a.	3.50% p.a.	7.90% p.a.
ICICI Bank	3% p.a.	7.25% p.a.	3.50% p.a.	7.80% p.a.
IDFC Bank	3% p.a.	7.75% p.a.	3.50% p.a.	8.25% p.a.
IndusInd Bank	3.50% p.a.	7.75% p.a.	4% p.a.	8.25% p.a.
Kotak Mahindra Bank	2.75% p.a.	7.40% p.a.	3.25% p.a.	8.14% p.a.
Punjab National Bank	3.50% p.a.	7.25% p.a.	4.30% p.a.	8.05% p.a.
SBI Bank	3.50% p.a.	7% p.a.	4% p.a.	7.50% p.a.
Yes Bank	3.25% p.a.	7.75% p.a.	3.75% p.a.	8.25% p.a.

Disclaimer: These rates are the latest as of November 2024 and are subject to the bank’s policy. They can change at any time at the discretion of the bank, so check them before you invest. 
Knowing the banks with the best fixed deposit rate helps you make better choices and potentially earn better returns. In addition, try to avoid withdrawing your funds before the tenure is complete. If you need urgent funds, choosing an affordable loan without any end-use restrictions can be a good solution.