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Short Term FD

Short-term deposits

Last Updated 21st Jan 2021

Tenure 7 days to 1 year
Interest rates 2.25% to 5.50%
Minimum Deposit ₹ 100 (may vary from bank to bank)
Premature withdrawal Allowed (penalty applicable)
Nomination facility Allowed
Loan against short term FD Allowed (up to 95% of the fund value)
    Earn upto 6.95% on FD APPLY NOW

    What is Short Term FD?

    Fixed Deposits are among the most sought-after investment tools of the current time. What attracts investors most towards this investment option is the higher interest rates than regular savings accounts along with guaranteed returns. The deposits made by investors is kept for a fixed tenure and hence, the name. Based on the tenure, fixed deposits are categorized in the long term fixed deposit and short-term fixed deposit. As suggested by the names, the first comes with longer tenure and the second with a shorter tenure.

    The short-term FD offers a tenure ranging from 7 days to 12 months. Interest is accrued on the principal amount through the selected tenure, and the total corpus is paid at maturity. Before making any investment decision, let’s have a detailed analysis of the short-term FD. 

    Best Short Term FD Rates

    Bank Rate of interest per annum
    Regular rates Rates for senior citizens
    ESAF Small Finance Bank 4.50% - 5.00% 5.00% - 5.50%
    DCB Bank 4.25% - 4.75% 4.75% - 5.25%
    Yes Bank 3.50% - 4.00% 4.00% - 4.50%
    AU Small Finance Bank 3.75% - 4.00% 4.25% - 4.50%
    Dhan Laxmi Bank 3.50% - 4.00% 4.00% - 4.50%

    As per the table, the ESAF Small Finance Bank provides the best short term FD rates and hence, is more beneficial than others. However, you are advised to go through all terms, conditions and other influencing factors before starting investment.

    Features of short-term fixed deposit  

    The features of the short-term fixed deposit have been listed below.

    • The short-term FD requires a one-time investment. The invested sum, along with interest earned, is disbursed at the time of maturity.
    • The FD interest rates offered by various banks and non-banking entities are higher than the rates provided under the regular savings account. 
    • The short-term FD allows premature withdrawal. However, penalties or other charges may be applied by the respective bank or NBFC.
    • The minimum deposit requirements differ from bank to bank. However, generally, the minimum limit is comparatively much lower in case of banks than NBFCs. 
    • The short-term deposit is subject to tax deduction under the Indian Income Tax Act of 1961. 

    Short-Term Investments Options

    Short term deposit or investment is highly beneficial as it offers high-interest rates. Many options are available for short term fixed deposits that you can choose from.

    Short term bank fixed deposits

    The short term bank FD is a good option for investment. You can opt for a tenure anywhere from 7 days to 12 months. The interest rates are generally from 2.25% to 5.50% based on the bank you choose. The minimum deposit amount for FD with banks is ₹ 100; however, there is no maximum limit.

    Post office time deposit

    With time deposits offered by the post office, you can opt for tenure from 1 year for short term investment. They offer interest at a rate that can range from 2.25% to 5.50%. The minimum deposit amount is ₹ 200. The best benefit of the post office time deposits is the tax exemption it offers under 80C section of the Indian Income Tax act. 

    Recurring Deposits

    Recurring deposits come with tenures of 3 months to 10 years. The interest rates range from 2.25% to 5.50%. You can choose any tenure from 3 months to 1 year for achieving your short term investment objective. However, keep in mind that recurring deposit does not allow premature withdrawal.

    Sweep-in Fixed Deposits

    Many banks offer sweep-in fixed deposits under various names. The sweep-in feature transfers any excess amount than a pre-decided margin from savings account to a fixed deposit. The tenure for the amount transferred from the savings account is generally 12 months, and the rate varies from each bank.

    Advantages of short term deposits

    Short term deposits provide the following advantages to the investors.

    • It is easy to start. The overall application process is quick and document requirement is very low.
    • It allows greater financial gain since it offers higher interest rates.
    • You can avail the nomination facility while open FD Account.
    • You can receive a loan equivalent to 95% of your FD without any guarantor.
    • The short-term FDs are treated as security by the government.
    • The deposit in short term FD can be utilized as margin money for non-fund based requirements.

    FAQs

    Can we do FD for 6 months?

    Yes, you can make FD for 6 months. The tenure of the can be as low as of 7 days and can go up to 10 years.

    What is the minimum duration of FD?

    The minimum duration of FD is 7 days.

    Which is better short term fd or long term fd?

    If you have short term financial requirements, then you should opt for short term FD. If you want to keep your deposit fixed for a longer period, then you should invest in long term FD.


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